The December Producer Price Index gives markets mixed signals

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Published Date 1/14/2025

Today's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are under a little pressure today. The MBS market worsened by -21 bps yesterday. This was not enough to increase mortgage rates or fees. The market experienced high volatility yesterday.

Today's Rate Forecast: Neutral

Optimism: December Small Business Optimism Index shot up from 101.7 to 105.1 which is the highest level since 2018.

Inflation: We got a mixed bag with the December Producer Price Index (PPI) as the MOM reading increased by 0.2% versus estimates of 0.3%. However YOY, it increased from 3.0% to 3.3%. Core PPI (ex food and energy) was flat at 0.0% on a MOM basis versus estimates of 0.3%. But YOY, it increased from 3.4% to 3.5%.

The Fed: Today we will hear from Schmid and Williams.

Today's Potential Rate Volatility: Neutral

This morning markets saw a small boost on PPI data but quickly fell back. Volatility has started at moderate levels.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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