Portland Mortgage Market Update — May 31, 2024

After worsening to their highest levels in months, rates got a reprieve today by a modest PCE report. There wasn't a lot on the books this week by way of market-moving reports, but a couple lackluster bond auctions were enough to push rates back up to March levels. Then, yesterday we got a sort of "sneak peek" of todays PCE report by way of a revision of last month's numbers, which was enough to kick off a rally.

Today, the rally continues! Not because the PCE Report was amazing and showed that we have inflation in check, but because it showed that things didn't worsen again! That is all it takes these days- for things to not get any worse. The core reading (which strips out food and energy costs) actually came in under expectations by .1%. Beyond these inflation figures there were consumer spending figures which came in lower than anticipated and a lower savings rate, which when taken as a whole paint a picture of a consumer that is feeling the pressure of the higher rate environment and could lead to a slowdown in the economy.

Expect these inflation figures to be pretty stagnant in the coming months. These reports provide month-to-month figures, and the main reading is taken by adding up the monthly reports for the past year. Unfortunately, last year's readings for the rest of the year are strong and are actually helping our year over year inflation look pretty good. The month to month readings that come in to replace them will likely be higher which will show (at least on the headline) that inflation is worsening again. Bottom line- employment needs to take a hit for rates to come down, because inflation won't hit the Fed's target this year.