Updated on November 13, 2019 10:25:04 AM EST
Octobers Consumer Price Index was todays only relevant economic data. It showed that the overall reading rose 0.4% while the more important core data increased 0.2%. The overall reading slightly exceeded forecast but the core reading that excludes more volatile food and energy prices pegged expectations. This is considered to be an important release since it measures inflationary pressures at the consumer level of the economy. It is not the cause of this mornings bond gains though. They were doing pretty well before this report was released.
This week’s congressional testimony by Fed Chairman Powell kicked off this morning when his prepared testimony was released. It didn’t reveal any significant surprises, indicating the Fed is likely to stay on its current path of waiting to see if future data or events justify another change to key short-term interest rates. We can take that to mean that we won’t see a rate cut or hike in the near future. Because this was not a surprise to the markets, they have had little reaction. The Q&A session is still to come, which could cause the markets to react soon.
Tomorrow’s sole monthly release will be Octobers Producer Price Index (PPI) at 8:30 AM ET. It is the sister release to today’s CPI but tracks inflation at the producer level of the economy. There are also two portions of this index- the overall reading and the core reading. Signs of rapidly rising inflation make long-term securities such as mortgage-related bonds less attractive to investors and leads to higher mortgage rates. The overall reading is expected to show a 0.3% rise from Septembers level while the core data is expected to rise 0.2%. Weaker than expected readings would be good news for bonds and mortgage rates while a larger than forecasted increase in the core reading could lead to higher mortgage rates tomorrow morning.
Day two of Chairman Powell’s congressional testimony will start at 10:00 AM ET tomorrow. The first day of these events usually impact the markets the most because his prepared statement tomorrow will likely mimic today’s statement. The difference is there will be different members of congress asking the questions, meaning there is a possibility of something unexpected being said.
©Mortgage Commentary 2019