Wholesale Prices Post Surprise Dip
Wholesale prices unexpectedly fell 0.1% in August, easing inflation pressures and strengthening the case for a Federal Reserve rate cut at next week’s meeting. The producer price index increase slowed to 2.6% annually, with core PPI also slipping, largely due to lower services and trade costs. Markets reacted positively, with futures showing near-certainty of a cut and a small chance of a larger half-point move. While inflation remains above the Fed’s 2% target, officials are growing more concerned about slowing job growth and easing wage pressures.
Rising Inflation and Jobless Claims Could Complicate Fed Outlook
Consumer prices rose 0.4% in August, pushing annual inflation to 2.9%, the highest since January, while core inflation remained steady at 3.1%. At the same time, weekly jobless claims jumped to 263,000, the highest in nearly four years, signaling possible labor market weakness. The mixed data creates a challenging backdrop for the Federal Reserve’s meeting next week, though markets now expect a rate cut with near certainty. Traders are also pricing in additional cuts later this year as the Fed weighs inflation pressures against slowing employment trends.
Mortgage Demand Surges as Rates Fall to 10-Month Low
A sharp decline in mortgage rates pushed total mortgage applications up 9.2% last week, the strongest weekly demand since 2022, according to the Mortgage Bankers Association. The average 30-year fixed rate dropped to 6.49%, its lowest level since October 2024, helping both homebuyers and homeowners seeking to refinance. Refinance applications jumped 12% week-over-week and were 34% higher than a year ago, while purchase applications rose 7% and were up 23% annually. Economists noted that falling Treasury yields and signs of labor market weakness drove rates lower, with adjustable-rate mortgages also gaining popularity due to their relative affordability.
