Aside from CPI, last week was quiet on the economic data front. Traders used the week to catch their breath and look around a bit at market conditions. They liked what they saw and strong demand for bonds pushed mortgage rates down.
This week, the big Market Mover Day is Thursday, coinciding with the release of the Personal Consumption Expenditures index. PCE is a lot like last week’s CPI except that it subtracts out sales made to business and governments. This helps to paint a more accurate picture of consumer spending.
There is debate over whether PCE is better as an inflationary gauge than CPI, but the Fed has gone on record as stating it’s a measurement in which they have keen interest. Specifically, this is because PCE isolates consumers and the cost pressures on their lives.
Year-over-year, PCE is expected to show an increase 2.3%. If the actual number is lower, expect mortgage rates to fall. If it is higher, expect rates to increase.