Inflation tame |Fed Funds rate should rise | Mortgage rates unchanged
December 13, 2017
Inflation at the consumer level was somewhat tame in November, due in part to weak healthcare costs and a big drop in apparel prices. The Labor Department reported that the Consumer Price Index (CPI) rose 0.4% in November from October, which was inline with expectations. When stripping out volatile food and energy, the more closely watched Core CPI rose 0.1%, below the 0.2% expected. Year over year, Core CPI fell to 1.7% from 1.8%.
The Federal Reserve Bank of the U.S. is expected to raise the short term Fed Funds Rate when the Fed meeting ends later this afternoon. The Fed Funds Rate should rise by 0.25% to 1.50%. The Fed Funds Rate impacts interest rates for car loans, credit cards, small business loans and home equity lines of credit. The Fed Funds Rate is the interest rate in which banks lend their balances held at the Federal Reserve to other banks on an overnight basis.
The Mortgage Bankers Association (MBA) reports that mortgage rates were essentially unchanged in the latest week as 2017 comes to a close. The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) rose to 4.20% from 4.19% with an average point of 0.39. The MBA also reports that the refinance share of applications fell 3.0% while the purchase index decreased 1.0%.