Mortgage Rates Today, Sep. 11, 2024: Inflation Likely Good for Rates

In brief

We delayed the publication of today's report so we could bring you the latest crucial data.

The biggest economic report of the week landed this morning, the consumer price index (CPI). And its inflation data were likely good for mortgage rates today and maybe for the next six days.

Last night's debate between the presidential candidates might also influence those rates. But markets will make up their own minds about who was the victor.

Chances are, a perceived win by Vice President Kamala Harris would tend to pull mortgage rates lower. That's based on the "Trump trade," which Forbes explained earlier this week:

"Economists believe Donald Trump’s trade and immigration policies will lead to higher inflation and lower economic growth. Trump has pledged to raise prices for consumers [through new tariffs], even though the cost of living remains a top economic concern among voters. Lower levels of legal immigration and attempts at mass deportation would reduce the supply of available workers, creating economic problems."

Coming up

Mortgage rates today

Consumer price indexes (CPIs) have been crucial to mortgage rates ever since inflation took off. The lower the price rises they reveal, the lower those rates tend to fall. And this morning's index was likely good for rates.

However, not everyone agrees with that analysis. Minutes after the report's release, MarketWatch said: "A key measure of inflation rose a touch faster than expected in August, potentially derailing the chance the Federal Reserve would make a steeper cut in interest rates next week."

It may be worth noting that another of this morning's numbers was a "touch" lower than expected, and a third was appreciably lower. We'll have to wait to see what markets make of the figures.

One week today, the Federal Reserve is due to announce a near-certain reduction in general interest rates. But investors are still unsure whether that will be a smaller (quarter-percentage-point) cut or a larger (half-percentage-point) one. Overnight, the CME FedWatch tool put the odds at 66% for the smaller and 33% for the larger.

Markets have already priced a smaller cut into mortgage rates. So, only a largely unexpected bigger one is likely to push mortgage rates much lower.

Indeed, a quarter-point cut might see mortgage rates rise a little as those investors betting on a half-point one trade their way out of trouble.

In any event, today's CPI will be the last inflation report (indeed, the last highly important economic report at all) the Fed will see before it decides on the size of next Wednesday's rate cut.

And, at least as crucially, the Fed will that day release its projections of future rate changes (the "dot plot"), which may also be affected by this morning's report.

So, expect markets to take it seriously.

The CPI by the numbers

The CPI comprises four headline components. Two cover the reporting month (August) and two are year-over-year (YOY) figures (Sep. 1, 2023, to Aug. 31, 2024).

There are two figures for each period. The first is regular CPI, which measures changes in the surveyed prices. The second is called "core CPI" and is the same figure after food and energy prices are stripped out. Economists and the Fed prefer core measures because they exclude the most volatile prices and so reveal the underlying trend.

Here are this morning's actual figures alongside what MarketWatch says markets were expecting before publication:

• August CPI: Today's actual: 0.2%. Markets expected 0.2%, unchanged since July.
• YOY CPI: Today's actual: 2.5%. Markets expected 2.6%, down from July's 2.9%
• August core CPI: Today's actual: 0.3%. Markets expected 0.2%, unchanged since July
• YOY core CPI: Today's actual: 2.5%. Markets expected 3.2%, unchanged since July
  

You can see that two figures were lower than expected and only one higher. The fourth came in as forecast.

On balance, we expect mortgage rates to move lower on the news. But markets sometimes react counterintuitively to major reports.

Tomorrow

Tomorrow brings initial jobless claims for the week ending Sep. 7. Normally, investors and the Fed ignore weekly numbers unless they're tracking a trend. But, with so much focus currently on employment, they might respond to this week's report.

MarketWatch says markets are currently expecting 225,000 new claims for unemployment benefits, slightly down from the previous week's 227,000. For mortgage rates, the higher the actual number the better.

Also tomorrow, we're due the producer price index (PPI) for August. This is the CPI's little brother and he's much less powerful than his big sister. Still, it's an inflation measure so it ain't nothing.

Markets are expecting raw PPI to inch up to 0.2% from July's 0.1%. But they anticipate that core PPI will inch down to 0.2% from 0.3% in July. Always with inflation data, the lower the actual numbers, the better for mortgage rates.

Also on Thursday, the European Central Bank (ECB, the eurozone's equivalent of our Fed) is due to announce its latest rates policy, with most expecting a cut. The Fed would say it's unaffected by its peers' actions. But it's bound to notice.

Friday's preliminary consumer sentiment index for September is expected to show an improvement compared to August's. But those who want lower mortgage rates would prefer it didn't.