In This Edition:

• Reports to Watch – Inflation data, Retail Sales
• X Factor – Inflation expectations

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Reports to Watch

The week is full of key economic data from a variety of sectors.

• Inflation numbers will be reported in Thursday’s wholesale Producer Price Index and Friday’s Consumer Price Index.
• Also being released on Thursday will be weekly Initial Jobless Claims and Consumer Sentiment.
• Retail Sales are scheduled for Friday.

X Factor

The holiday-shortened week does carry some key economic reports. The highlight will be inflation numbers from the Producer Price Index and Consumer Price Index.

As mentioned, the Fed does see that inflation could pose a risk to the U.S. economy. An uptick in inflation could bring modestly higher home loan rates, but we will have to see if pressures materialize.

Inflation has been running below the Fed’s target range for quite some time. The Fed’s favorite inflation measure, the Core Personal Consumption Expenditures (PCE), was recently seen at 1.8 percent year-over-year, below the 2 percent target.

Remember, inflation is an important measure to watch because rising inflation reduces the value of fixed investments like Bonds. Since home loan rates are tied to Mortgage Bonds, home loan rates can improve when Mortgage Bond prices improve. The opposite is also true.