Markets Pushed and Pulled: No Changes to Rates

Happy Friday from Local Mortgage!

Mortgage markets were pulled in different directions this week. Increased tensions in the Middle East caused oil prices to climb, raising concerns about the outlook for future inflation. On the other hand, consumer spending slowed, and certain inflation measures came in softer than expected. While these offsetting influences created some market volatility, mortgage rates finished the week with little overall change.

We will end the week still at 6.375% for our best 30-year fixed Conventional scenario.

The Consumer Price Index (CPI) report, one of the most closely watched inflation indicators, brought some encouraging news. Prices rose just 0.1% in July from June, right in line with expectations. On an annual basis, CPI was up 3.4%, down from 3.5% in June and the lowest level since March.

Consumer spending also showed signs of moderating. After the temporary boost from larger than usual tax refunds faded, retail sales in July unexpectedly dropped 0.6% from June, far worse than the consensus forecast for a slight increase and the weakest monthly reading since May 2025. Spending continued to be driven by higher-income households, supported by continued strength in the stock market. Of note, non-store retailers posted a large decline this month, likely in part because Amazon Prime Day took place in June this year instead of July.

The big picture: Inflation appears to be gradually cooling, while the economy continues to show resilience. Investors will be watching that balance closely for clues about the Federal Reserve's next moves and what those moves could mean for mortgage rates in the months ahead.

Looking ahead, attention will remain fixed on the conflict in the Middle East and the proposed deal to ease tensions. Investors also will monitor comments from Fed officials about future monetary policy. The detailed minutes from the July 29 Fed meeting will come out on Wednesday. It will be a light week for economic data. Housing Starts and Import Prices will come out on Tuesday.