Inflation can have a big impact on the Bond markets, and also on home loan rates, which are tied to Mortgage Bonds. Here’s what you need to know.

What is the Consumer Price Index (CPI) report? The CPI measures monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services.

What’s happened recently? Plunging prices at the gas pumps led consumer prices lower in November. The CPI fell by 0.3 percent, versus the -0.1 percent expected, as the inflation-reading gauge posted its largest monthly decline in six years.

What’s the bottom line? Inflation is known as the archenemy of Bonds and home loan rates, as inflation reduces the value of fixed investments like Bonds. This means that low inflation often comes hand in hand with low home loan rates. But keep in mind that when inflation begins to creep into our economy, it can create rapid changes in the interest rate climate.

I’ll continue to monitor inflation reports closely, but if you have any immediate questions, please call or email today.

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