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Mortgage rates face volatility as core CPI shapes Fed hike odds

With odds for a September 16 hike near 50-50, forecasters suggest a 0.2% monthly core CPI reading would likely support the Fed holding, while about 0.3% could shift markets toward tightening.

Reported · Written up by our desk · Inflation

Mortgage rates could move sharply this week as investors weigh upcoming inflation data for clues on the Federal Reserve’s next steps, with the Wednesday CPI release seen as the most important event, according to Redfin News.

The market is currently pricing roughly a 50-50 chance of a rate hike at the September 16 meeting. The Fed’s focus on core inflation, which excludes food and energy, means the size of the monthly core CPI print could be pivotal for whether the policy path shifts.

Redfin News said expectations cluster around a 0.2% monthly increase in core inflation, which would likely give the Fed room to hold rates, especially after a weak jobs report on Friday. A core CPI reading closer to 0.3% on a monthly basis could instead place the economy on a path toward a hike.

The report also pointed to other data releases that may influence expectations, including retail sales and consumer sentiment on Friday, and it connected weaker labor-market signals to housing demand, noting that a softer job market can reduce housing demand at a given mortgage rate.

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