Tuesday brought an unfriendly conflicting response to the rates. Don’t worry. We can switch gears to words that make more sense now.

Rates started off in good shape, with most lenders slightly lower than yesterday. This was made possible by today’s key inflation data coming in close line with forecasts.

When economic data are right in line with forecasts, the effect of interest rate fluctuations is as small as can be. Contrast this with the alternative extremes where a rise in inflation would have caused rates to skyrocket or where a large drop in inflation would have paved the way for much lower rates.

The initial reaction to today’s inflation data was akin to a small sigh of relief with modest gains for rates, but unfortunately it turned out to be a multi-pronged affair, focusing most of its efforts on raising rates. Attempts to explain the “why” will end up in analytical territory where one is coming up with an analysis for a certain result.

There are many legitimate ways to do this, but rest assured, no one would dig too deeply into that analytical endeavor if rates didn’t paradoxically reverse in the middle of the day. In other words, we would all be saying that “inflation was in line with forecasts and a slight easing of rates makes sense.”

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The loss wakes the average lender up to 7% 30yr fixed rates for top-tier scenarios.

Yesterday’s Fed announcement included updated rate forecasts that may address today’s market concerns. In short, some say the Fed will use those forecasts to telegraph another rate hike or two in 2023. All sizes and shapes.

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