Inflation slips as the Fed prepares for another rate hike in June

The Fed’s favorite inflation reading didn’t produce a favorable number this month.  The PCE index (personal consumption expenditures) rose 1.7% in April 2017 which is down from the 1.9% reading in March and the 2.1% reading from February.  Core inflation, which is apart of the Fed’s tools to gauge inflation, slowed to the weakest annual pace since 2015.   What’s helping prices stay low?  Oil is a big part of that answer; as it continues to dip from Janet Yellenthe highs seen in April.  So what does this all mean?  With prices coming down could we start hearing “deflationary” talk again?  The simple answer is that it’s to early to tell and the easing of prices recently probably won’t prevent the Fed from raising their rate at the next meeting.

So far the FOMC has done a good job with moderately raising rates in a thoughtful manner.  Some people believe they took to long and they’re not raising rates fast enough while others believe it’s a huge mistake to raise rates since we are not back to higher levels of job, wage and GDP growth.  At the end of the day we’ve seen a stable market and have avoided the run away inflation so many people predicted when the FED refused to raise rates a few years after the banking crisis.  I get asked a lot; does the FED control mortgage rates?  Will the FED prevent the best mortgage rates from coming back in 2017?  The simple answer to both questions is no…the FED does not control mortgage rates and I don’t think the FED is trying to prevent mortgage rats from moving lower.  What we’ll most likely see at the next FOMC meeting is similar language as before with maybe a slight twist about the concerns over prices cooling (and they’ll raise another .25%).  Overall this should be fine in terms of how the FOMC may influence mortgage rates.

Are you looking to refinance your current mortgage or purchase a new home in California?  Then contact us directly for a no cost and no obligation quote: 1-800-550-5538.