Fed Hike Odds Rise After Inflation Data - MBS Highway Weekly Update September 14, 2026
Week of September 7, 2026 in Review The latest inflation data leaves the door open to a Fed rate hike, while existing home sales declined for the third straight month. Here's what you need to know.
Inflation Data Keeps Fed Rate Hike in Play
Inflation increased in August, with the headline Consumer Price Index (CPI) rising 0.4% from the previous month, driven largely by higher gas and energy costs. The annual rate held steady at 3.4%.
Core inflation, which excludes food and energy, rose 0.3% for the month but fell to 2.4% year over year – its lowest level in more than five years.
Wholesale inflation was less encouraging directionally. Higher energy prices, particularly diesel, pushed the headline Producer Price Index (PPI) up from 4.8% to 5.4% year over year, slightly above expectations. Core PPI also increased annually, rising from 4.3% to 4.6%. While higher wholesale inflation does not always translate directly into higher consumer prices, the direction of the latest PPI data is worth watching.
Bottom line:
Annual Core CPI is making progress, but it remains above the Federal Reserve's 2% target. The hotter monthly CPI readings, combined with uncertainty around energy prices, could make the Fed more inclined to raise its benchmark Fed Funds Rate at its September 16 meeting. Current market expectations put the odds of a 25-basis-point hike above 80%.
While the Fed does not directly set mortgage rates, its decisions influence borrowing costs across the economy
Existing Home Sales Ease Again
Existing home sales fell 2% from July to August, marking the third consecutive monthly decline. Sales reached a seasonally adjusted annual rate of 3.98 million homes, 1.2% below August 2025 levels.
Meanwhile, inventory continued to build. The number of homes available for sale increased 3.2% from July and was 5.9% higher than a year earlier.
Bottom line:
National Association of REALTORS® Chief Economist Lawrence Yun noted that mortgage rates and home sales typically move in opposite directions, so the recent dip in sales isn't surprising given today's higher rates. Yet even with the recent slowdown, existing home sales are up 1.6% so far this year.
Quick Look: Unemployment Claims
Unemployment claims continue to tell the same story this summer.
Initial filings remain relatively low at around 206,000, but they may not capture the full picture as some workers who lose jobs are turning to freelance or gig work rather than filing for benefits.
Meanwhile, continuing unemployment claims remain elevated at 1.77 million, suggesting it is taking longer for some job seekers to find new employment.
What to Watch Ahead
The Federal Reserve's meeting is the main event this week. The meeting begins Tuesday, with the Fed's policy announcement and press conference scheduled for Wednesday afternoon.
We'll also get several important housing and economic reports. Wednesday brings home builder confidence and the latest retail sales data.
On Thursday, we'll get new home construction data, Pending Home Sales, and the weekly jobless claims report.
All data and analysis provided by MBS Highway.
Contact me anytime to continue the dialogue.
Mike Nelson, Efficient Lending, Inc 720.419.3016 | mike@efficientlending |
