The Consumer Price Index rose 0.4% to a year-over-year increase of 1.9%, due in part to a spike in gas prices–which are up 6.3% from January 2017.  Compared to a few years back, of course, it’s still a bargain at the pump.  I think that I’m paying about half of what I was to sink 20 gallons of premium into my SUV back in 2013.  So you won’t hear any complaints from me right now.

In broader terms though, higher oil and gas prices lead to higher costs to produce and distribute goods, and that means inflation.  Moderated inflation is what the Fed is looking for before raising rates again, but I believe that it will take more several months (and many more signs of increasing costs) before the Fed has sufficient argument to make a move of any kind.

Today is Fed Day, but because nobody thinks that the FOMC meeting will have an impact on the markets, you have to dig pretty deep in any news source to even find mention of the meeting. In the post meeting read statement, we’ll look for insight as to when they might start to sell off their $4.5 trillion in assets.  That news could prove inflationary, which would lead to higher interest rates.  In the last decade, inflation has been about as threatening as these two cute little ducklings.  

The Case Shiller 20-City Index rose 5.7% over the last 12 months, which is up from the 5.5% year-over-year gains posted the previous month.  In my little experience, I am seeing that rising home prices and rising interest rates are making it increasingly difficult for low income families to purchase a house.  Though the value of goods in most sectors is increasing, there is a buyer for just about everything out there for sale.  Consequently, Consumer Confidence swelled well past the 113.3 expected index reading to an astonishingly high 125.6.  Consumer spending accounts for 2/3 of the economy, so a positive outlook is a big deal , because it typically leads to big spending later on.  The danger to the mortgage market is that with increased spending and higher prices comes inflation, which always pushes interest rates upward.  

Home Prices Outpace Inflation

Inflation numbers for last month are in at an increase of 0.3%, and a year-over-year level of 2.1%–matching exactly the prior month and in line with expectations.  Energy and transportation costs continue to rise 0.2% faster than the other measured sectors.  The consequential costs associated with driving all over the valley to show homes hasn’t deterred home sales however; Existing Home Sales are up 2.6% in June alone to 5.04M units moved.

It’s nice to be back at my desk after spending last week in the memorable-but-dusty middle of nowhere.  And honestly I can’t wait to get up to the mosquito-infested Uintas next week.