Inflation News
What the markets were more interested in was the inflation readings within the report. The Fed’s preferred inflation gauge- Personal Consumption Expenditures (PCE) index, actually gave more bad news than good. The overall PCE for June rose 0.1% and the annual reading slipped 0.1% to a 2.5% yearly pace, as they were expected to do. Both of the Core PCE monthly and annual readings exceeded predictions by 0.1% (up 0.2% and 2.6% respectively). Since the Fed relies mostly on the core data, we have to label the inflation readings bad news for bonds and mortgage rates. For some reason, and to the benefit of mortgage shoppers, bond traders are opting to ignore this morning’s inflation numbers.