Last week’s scheduled economic reports included readings on inflation, Fed Chair Jerome Powell’s testimony before the House Financial Services Committee, and the University of Michigan’s Consumer Sentiment Index. Weekly readings on current mortgage interest rates and jobless claims were also released.
Consumer Price Index: June Inflation Grows at Fastest Pace Since 2008
June’s Consumer Price Index showed the fastest pace of inflationary growth in 13 years; inflation grew by 5.40 percent on a seasonally-adjusted annual basis. Used car sales accounted for one-third of the growth, but prices also rose for clothes, food, energy, and travel/hospitality. The year-over-year inflation rate for May was 5.00 percent.
Moreover, inflation grew by 0.90 percent month-to-month, which exceeded analysts’ expectations of 0.50 percent growth and a 0.60 percent growth in May. The Core Consumer Price Index, which excludes volatile food and energy sectors, also grew by 0.90 percent in June as compared to a month-to-month reading of 0.70 percent in May. Analysts expressed concern that the rapid pace of inflation may not slow as quickly as the Federal Reserve predicted.
Fed Chair Jerome Powell Testifies Before House Financial Services Panel
Fed Chair Jerome Powell maintained the Federal Reserve’s earlier prediction that the pace of inflation would ease, but not immediately. “Inflation has increased notably and will likely remain elevated in coming months before moderating,” Mr. Powell said, and he also noted that inflationary growth has come in at a faster pace than the Fed was hoping to see.
Overall, Chair Powell points to three factors contributing to current inflationary growth, including weak inflation during the pandemic (dropped out of the year-over-year calculation), as well as production and supply chain constraints that have led to sharp price increases after the pandemic. The third and final factor or economic indicator is a surge in demand for services that we have notably seen since the economy reopened. The Fed Chair said, “This is a pretty narrow group of things, but it is these factors that are producing these high readings.”
Current Mortgage Rates, Jobless Claims Fall
In other news, Freddie Mac reported mixed interest rates for mortgages last week as the rate for 30-year fixed-rate mortgages averaged 2.88 percent and were two basis points lower. That said, rates for 15-year fixed-rate mortgages rose by two basis points to an average of 2.22 percent. Rates for 5/1 adjustable rate mortgages, on the other hand, fell by five basis points to 2.47 percent on average. Additionally, discount points averaged 0.70 percent for 30-year fixed-rate mortgages and 0.60 percent for 15-year fixed-rate mortgages. And discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.
Similarly, new jobless claims fell, with only 360,000 initial claims filed from the previous week’s reading of 386,000 claims filed. Note, data for continuing jobless claims was not updated last week.
Last but not least, the University of Michigan reported no change in its Consumer Sentiment Index for July, with an index reading of 85.5. Analysts expected a reading of 86.3.
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