No one can repeatedly, accurately predict the future. In sports, there are odds, but always upsets leading to the old saying, “That’s why they play the game.” In economics, the same applies. Yes, there are indications about stock market trends, interest rates, and what the Federal Reserve may do through the actions of its Open Market Committee.

Orion’s management mentions this because the Fed has often discussed a “target”inflation rate of two percent, and for nearly a year inflation has been running at a much faster pace. Efforts to lower the inflation rate typically mean dampening the economy, and the FOMC has been raising short term rates in an effort to do that. But inflation has been stubborn, and our brokers know that rate shave continued to increase.

This week the September Producer Price Index (PPI) report comes out on October 12 and is expected to show a 0.1 percent month-to-month drop. After stripping out food and energy costs, PPI is forecast to rise 0.3% from August and 7.3% compared to a year ago. Some economists forecast a below-consensus flat PPI reading following two consecutive monthly declines, which could tamp down some inflation fears.

But any optimism will be tested when the Consumer Price Index (CPI) comes in on the next day. Orion has heard expectations of a decline in the year-over-year inflation to 8.1 from 8.3 percent in August, while a modest acceleration in monthly headline CPI is anticipated to reflect a slower decline in energy prices (-3.5 percent M/M), continued elevated food inflation (+0.7 percent),and strong core inflation (+0.4 percent). While rent prices have moderated, that is not expected to impact the CPI figures this month 

Orion’s AEs are telling brokers that any indications that inflation is worse than expected could lead to higher mortgage rates, and rates in general. If inflation unexpectedly comes down, we could see a reduction in mortgage rates. Regardless of interest rate movements, however, Orion continues to offer our brokers some programs to offer clients that help blunt the impact of the overall high interest rate environment. Just ask your AE!

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