Mortgage rates in June could be turbulent

The monthly Consumer Price Index (CPI) and the Fed's Monetary Policy Committee meeting on June 12 may trigger volatility in mortgage interest rates.

New York - Mortgage rates probably won't change much in the first week and a half of June. But as of June 12th, it's anyone's guess what he will do to rates.

Several factors affect mortgage rates. In the last two years plus, two items had a particular impact: the monthly consumer price index, and the meetings of the Federal Reserve's monetary policy committee. And both will happen on June 12, in an uncommon fold in the calendar.

The consumer price index, which measures inflation, has the ability to move mortgage rates on its own. Higher-than-expected inflation can push rates higher, and lower-than-expected inflation can lower them. Decisions made at the Fed meeting can also send interest rates up or down. Financial markets usually have days or weeks to digest one before reacting to the other: in May, the Fed meeting ended on the first of the month, and the CPI report was released on the 15th.

But markets will only have five and a half hours to look between reports in June. First up is May's CPI, at 8:30 a.m. ET on June 12. The Fed's monetary policy statement will be published at 14:00, accompanied by an updated set of economic forecasts from the central bank. The policy statement and economic forecasts will be followed half an hour later by Fed Chairman Jerome Powell's press conference.

That's a lot of information that can move a market in one day. Back-to-back events may cause volatility in mortgage interest rates, pushing them suddenly in one direction or another. But it's just as likely that rates won't react much at all. It depends on whether the CPI or the Fed deliver a surprise.

A lot of uncertainty

Mortgage rates move up or down depending on the investors' outlook on the economy. An unexpectedly rosy or gloomy economic report can reset that outlook, causing interest rates to soar or plunge. Inflation measures like the CPI have this power. For its part, the Fed tries not to disturb investors. But it also has the ability to shock markets - intentionally or not - when it changes its economic forecasts.

If surprise headlines emerge on June 12, they could send mortgage rates on a wild ride. Or the day can proceed according to expectations, without stopping hairs from the mortgage market. We won't know today's results until the end of Powell's press conference.

Word of the month: 'volatility'

As of the end of May, the Cleveland Fed predicted that the Consumer Price Index report for June 12 would show that core consumer prices rose by about 3.6% in May, the same as the April reading. Based on this forecast, the 30-year fixed-rate mortgage was between 7% and 7.25% at the end of May. The rate is expected to remain in this range until June 11 as markets await the big day.

Then June 12 rolls around, and with it the index report. If the core consumer price index drops significantly - say, to 3.4% or less - the interest on mortgages may drop. If the core index is above 3.6%, the interest on the mortgages may increase. If the CPI is 3.5% or 3.6%, the mortgage market may remain without much interest rate movement.

Hours later, the Federal Reserve and Powell could strengthen or reduce the impact of the index report. Financial markets expect the Fed to cut short-term interest rates in September or November, and investors will heed any hint that the central bank will act sooner or later. No matter what happens, the events of that day may guide the course of mortgage interest rates for weeks

"Expect more volatility in interest rates as the Fed and investors wait for more conclusive evidence of a return to lower, more stable and predictable inflation," Zillow senior economist Orpa Dibongoi said in a press release.

If you are trying to decide whether to float or lock in a mortgage rate, contact your loan officer, who will have up-to-date information.

What other forecasters predict

Fannie Mae and the Mortgage Bankers Association revised their mortgage rate forecasts upward in May as inflation proved stubborn. Fannie Mae's outlook is less optimistic than MBA's.

what happened in may

The average 30-year fixed-rate mortgage rate averaged 7.01% in May, barely a drop from April's average of 7.04%. The 30-year mortgage was above 7.25% at the beginning of the month, then fell below 7% for several weeks before recovering above 7% last week