Hot October Inflation Adds Pressure to Mortgage Rates
Markets put the odds of a quarter-point Fed increase in December at 85%.
October’s inflation report came in stronger than economists expected, putting renewed upward pressure on borrowing costs for home shoppers. The consumer price index increased 0.4% during the month, while the measure excluding food and energy rose 0.3%. Forecasts had called for smaller gains in both readings.
Investors quickly raised the likelihood of a Federal Reserve rate increase at its December 8–9 meeting. The market now assigns an 85% chance to a 25-basis-point move, while some bets point to a possible 50-basis-point increase. The Fed’s benchmark rate is currently between 3.75% and 4%, following a September increase that was its first since 2023.
Housing costs rose 0.3% and contributed more than 30% of the monthly inflation increase. Energy prices gained 0.7%, and food prices rose 0.5%. The 30-year mortgage rate remains above 7%, and two-year Treasury yields reached 4.71% after the report. Those developments leave buyers and borrowers facing continued affordability pressure as the Fed’s next decision approaches.
Why it matters: Higher inflation expectations can keep mortgage borrowing costs elevated, making monthly payments and purchase budgets harder to manage.
- Mortgage Professional America
- Redfin News