Peak Inflation… Probably Not Yet

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Filed under: Market Comentary

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Today, a big economic data point came out: Consumer Price Index (CPI). It’s an inflation number, which is an important hot button in the mortgage industry right now, because inflation is the main reason why interest rates are going up.

Inflation is Up

Inflation, as expected, it came in at a high number: 8.3% is the headline number. Take out food and energy, and it’s still 6.2% year over year. These are really big numbers – we haven’t seen inflation like this since the 80’s.

Another thing that I keep hearing about is PCE, which came in a little lower than expected. So, there’s been a lot of chatter about how we are at peak inflation and we are going to start to see it come down.

Year-Over-Year Numbers

But the truth is that the numbers are not saying that we are going to see inflation coming down. Look at the month-over-month numbers going back a year, there are some reads coming up that will start to fall out. Getting rid of those numbers tells us that inflation is just baked in for now.

When Will Peak Inflation Happen?

It looks like peak inflation will hopefully happen in late summer or early fall before we start seeing things track down. Fingers crossed it actually happens so we can start to see some improvement in interest rates.

If you have been wondering when interest rates are going to start to go down, the key is to watch inflation. For now, interest rates are expected to stay high as long as inflation continues to come in hot.

The Silver Lining: Inventory

If there is a silver lining in this, it is that we are starting to see inventories come up. This is what happens each year, and we are seeing it happen this year as expected. It’s going to met with a bit less demand.

Some people are sitting on the sidelines right now because they are facing the combination of higher prices and higher interest rates – which is pricing people out from buying the house that they really want.

For those people who can still afford it, then it might be a good time to get in. Then, if rates come down, we can do a refi in the future and hopefully save you a few hundred on your payment.

In the mortgage world, inflation is the biggest news right now. If you have questions about mortgage rates or financing, then I’m always here to help!

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