Wholesale Inflation Cools at the Margin
Wholesale inflation came in softer than expected in November, with the producer price index rising 0.2% while core PPI was flat. Despite the modest monthly increase, headline PPI was still up 3% year over year, remaining well above the Fed’s 2% target. Goods prices drove most of the increase, led overwhelmingly by higher energy costs, while services prices showed no change. Financial markets reacted little to the data, and expectations for near-term Fed policy remained largely unchanged.
Core Consumer Inflation Shows Gradual Progress
Core consumer inflation rose less than expected in December, reinforcing signs that price pressures are easing but not yet fully contained. Core CPI increased 0.2% on the month and 2.6% year over year, while headline inflation held at 2.7% annually, matching expectations. Shelter costs remained a key source of inflation stickiness, even as some goods categories continued to show outright deflation. Markets interpreted the report as supportive of the Fed staying on hold as policymakers balance lingering inflation risks against broader economic conditions.
Mortgage Rates Drop Sparks Demand Surge
Mortgage demand jumped sharply last week as borrowers returned from the holidays and reacted to lower interest rates, including a brief dip below 6% on news of a potential government push to buy mortgage-backed securities. Total mortgage applications surged 28.5%, with refinancing activity jumping 40% week over week and more than doubling from a year ago. Purchase applications rose 16%, helped by post-holiday activity, easing home prices, and improved inventory rather than rate sensitivity alone. Rates have since edged higher again, though softer inflation data helped prevent a larger rebound.
As always, Base Wealth Management remains focused on aligning investment strategies with your long-term goals amid evolving market conditions.
