Consumer Price Index (CPI)
June's Consumer Price Index (CPI) starts this week’s events at 8:30 AM ET tomorrow. This is very important data because it measures inflationary pressures at the consumer level of the economy. Rapidly rising inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. It is expected to show a 0.5% rise in the overall reading and a 0.1% increase in the core data. The core reading is the more important of the two since it excludes more volatile food and energy prices, revealing a more reliable inflation measurement. Last week’s Producer Price Index (PPI) gave us much weaker than expected readings. If we see similar results in the CPI, the bond market should react favorably and possibly lower rates. However, a larger than expected rise in the core reading could send mortgage rates higher tomorrow morning.