Providing mortgage loans and information

Updated on January 15, 2025 10:39:01 AM EST

This morning’s big economic release was December’s Consumer Price Index (CPI) that showed core inflation at the consumer level of the economy slowed a little over the past year. The monthly overall CPI rose 0.4% when it was expected to rise 0.3%. Offsetting that news is the 0.2% rise in the core reading that excludes more volatile food and energy costs, matching expectations. The really good news came in the year-over-year numbers of 2.9% in the overall reading and a weaker than expected 3.2% increase in core data.

It is obvious that yesterday’s PPI figures are also helping to fuel this morning’s bond rally. Traders were apparently hesitant to react to yesterday’s data until the more important CPI was available today. Both helped support the theory of downward movement in annual inflation, albeit a modest move. In other words, we are seeing two days worth of rally this morning.

We also have the Fed Beige Book report coming at 2:00 PM ET today. This report details economic conditions throughout the U.S. by Fed region through the eyes of their business contacts. The markets are mostly interested in feedback about inflationary pressures and employment strength since they will contribute to the Fed’s upcoming monetary policy decisions. It is usually released two weeks before the FOMC meets, aligning with the January 28-29 scheduled meeting. If there is a reaction to what the report shows, it will come during mid or late afternoon trading today.

Tomorrow completes the trilogy of major economic reports with the release of Decembers Retail Sales report at 8:30 AM ET. This data tracks consumer spending, which is highly important to the markets because the category makes up over two-thirds of the U.S. economy. Current forecasts show a 0.5% rise in overall sales, indicating economic strength. Analysts are also expecting a secondary reading that draws some attention to show 0.4% rise in sales if more volatile and costly auto transactions are excluded. Stronger than predicted sales would be considered bad news for bonds and likely lead to an increase in mortgage pricing tomorrow. Favorable news for rates would be weaker numbers.

Last week’s unemployment figures will also be posted early tomorrow morning. They are expected to indicate 211,000 new claims for jobless benefits were made. This would be an increase from the previous week’s 201,000 initial filings. Rising claims are a sign of weakness in the employment sector. Therefore, the higher the number the better the news for rates. That said, the sales data will likely be the focus tomorrow morning since it is a monthly report and includes highly relevant data.