Last week’s inflation reports, both the CPI and PPI, came in significantly cooler than expected. However, this must be viewed in the context of the administration’s recent tariff policies. Rather than signaling a healthy reduction in inflation, the data points to signs of deflation—which can be just as damaging to the economy as high inflation. While the FOMC Minutes offered little insight regarding interest rate changes, Federal Reserve Chairman Jerome Powell has made it clear that no action will be taken until more data becomes available. Finally, the latest consumer sentiment report dropped to its lowest level in three years, with inflation concerns reaching their highest point since 1981.

Consumer Price Index

Consumer prices fell in March for the first time since the outbreak of the coronavirus pandemic in 2020, but economists warn inflation could get worse if the U.S. retains higher tariffs on China and the rest of the world. The consumer-price index declined 0.1% last month, the Bureau of Labor Statistics said, aided by falling oil prices and lower airfares. It was the first drop since May 2020.

Producer Price Index

Cheaper oil has taken some pressure off on the inflation front, but it may only be temporary in the face of a major trade war between the U.S. and China. Wholesale prices in the U.S. fell 0.4% in March, dropping for the first time in 17 months, mimicking a similar report on consumer goods and services that showed retail-level inflation was muted last month.

Consumer Sentiment

The University of Michigan’s gauge of consumer sentiment fell to 50.8% in a preliminary April reading from 57.0% in the prior month.  It is the lowest level since June 2022. Sentiment has dropped for four straight months and is down 30% from December. Economists polled by the Wall Street Journal had expected an April reading of 54.6%.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw no change from last week, with the current rate at 5.82%
• 30-Yr FRM rates saw a decrease of -0.02% for this week, with the current rate at 6.62%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.47% for this week. Current rates at 6.50%
• 30-Yr VA rates saw an increase of 0.47% for this week. Current rates at 6.52%

Jobless Claims

Initial Claims were reported to be 223,000 compared to the expected claims of 223,000. The prior week landed at 219,000.

What’s Ahead

Very light release week with low impact data in the form of Federal Reserve’s beige book, Consumer Sentiment, and Leading U.S. Economic Indicators.

The previous week has seen tremendous impacts with the Trump administration’s recently revealed tariff policies, sparking widespread concern about their broad economic effects. These concerns have already led to rapid contractions in multiple markets.

Jerome Powell, Chairman of the Federal Reserve, has stated he is very uncertain about any moves made by the Federal Reserve and wants to wait for additional information before making decisions.

Uncertainty is at an all-time high, without much relief—even in light of positive data from previous months. Without any clear direction, there is growing speculation that inflation will only increase from here. Meanwhile, employment data has already shown a rapid increase in unemployment forecasts.

U.S. Employment Report

The U.S. added a bigger-than-expected 228,000 jobs in March. Good news to be sure, but that was before President Trump unveiled norm-shattering tariffs on the rest of the world, the repercussions of which are yet to be felt on the labor market. Economists polled by the Wall Street Journal had forecast an increase of 140,000 new jobs in March vs a revised 117,000 gain in February. The unemployment rate, meanwhile, moved up to 4.2% from 4.1%, matching the highest rate in five months.

ISM Manufacturing

According to the Institute for Supply Management (ISM), tariffs are driving up business costs and dampening economic activity. U.S. manufacturers appear to have slipped back into a slump, facing higher input prices and weaker demand due to President Donald Trump’s new metal tariffs and pending duties on other imported goods. ISM’s manufacturing index fell to 49% in March, down from 50.3% the previous month—any reading below 50% indicates a contraction in the sector.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of -0.07% with the current rate at 5.82%
• 30-Yr FRM rates saw a decrease of -0.01% with the current rate at 6.64%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.15% for this week. Current rates at 6.03%
• 30-Yr VA rates saw a decrease of -0.15% for this week. Current rates at 6.05%

Jobless Claims

Initial Claims were reported to be 219,000 compared to the expected claims of 228,000. The prior week landed at 225,000.

What’s Ahead

Following reports that the tariff news has disrupted market expectations, we should anticipate that both the CPI and PPI forecasts will come in higher than expected.

With the introduction of tariffs on Tuesday, there is significant uncertainty across all sectors regarding the potential outcome. While important data releases—including the PCE Index, Personal Income & Spending, and Consumer Sentiment for the quarter—have taken place, their impact is expected to be largely overshadowed by apprehension surrounding the widespread tariff decisions.

With the upcoming release of inflation reports, including the CPI and PPI this week, all eyes will be on these two key metrics. The focus remains on tariffs and their impact on the markets, as well as inflation, which is likely to be influenced by the new tariff policies.

PCI Index

A separate measure of prices known as the core rate rose a sharper 0.4% in February, a tick above Wall Street’s forecast. The increase in the core PCE in the past year climbed to 2.8% from 2.7%. The core rate omits food and energy prices, which often jump up and down in the short run. It’s seen as a better predictor of future inflation.

Consumer Spending

Consumer spending rose a modest 0.4% last month, the government said, and rebounded from a decline in January. Economists surveyed by The Wall Street Journal had projected a 0.5% gain. Household spending is the main engine of the U.S. economy, but it appears to have sputtered in early 2025.

Consumer Sentiment

The final reading of consumer sentiment in March fell to a 32-month low, as more Americans than at any time since the financial crisis think unemployment will rise in the year ahead. The second of two readings of the consumer-sentiment survey fell to 57.0 from an initial 57.9, the University of Michigan said Friday.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.06% with the current rate at 5.89%
• 30-Yr FRM rates saw a decrease of -0.02% with the current rate at 6.65%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.03% for this week. Current rates at 6.18%
• 30-Yr VA rates saw an increase of 0.03% for this week. Current rates at 6.20%

Jobless Claims

Initial Claims were reported to be 224,000 compared to the expected claims of 226,000. The prior week landed at 225,000.

What’s Ahead

CPI and PPI are ahead next week as well as the tariffs, which are set to be in effect starting Tuesday.

The previous week had the Federal Reserve making their first rate decision since the Trump administration had taken office. With many uncertainties about the current direction of things, the Federal Reserve had decided there would not be any change necessary to the current rates. Stating that the current inflation and economic conditions have largely been a result of the Trump administration’s policies on tariffs. Chairman Powell has been strongly dovish at this point, stating they would need to “see how things actually work out.” There were a slew of other minor data releases but none were far reaching in their impact on the economy and current direction of things.

FOMC Rate Decision

Faced with pressing concerns over the impact tariffs will have on a slowing economy, the rate-setting Federal Open Market Committee kept its key borrowing rate targeted in a range between 4.25%-4.5%, where it has been since December. Markets had been pricing in virtually zero chance of a move at this week’s two-day policy meeting.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.03% with the current rate at 5.83%
• 30-Yr FRM rates saw an increase of 0.02% with the current rate at 6.67%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.13% for this week. Current rates at 6.15%
• 30-Yr VA rates saw a decrease of -0.13% for this week. Current rates at 6.17%

Jobless Claims

Initial Claims were reported to be 223,000 compared to the expected claims of 225,000. The prior week landed at 221,000.

What’s Ahead

Next week should feature a slew of data releases, most notably the GDP Estimates, S&P Global US Manufacturing / Services PMI estimates, Consumer Confidence, Consumer Sentiment (Univ. of Michigan), and Personal Income & Spending.

The inflation data report released last week showed a surprising result—it was cooler than expected across the board. This has led to a much more positive outlook, even in light of recent events regarding the Trump administration. While consumer sentiment reports from the University of Michigan still showed more dissatisfaction than expected, they were accompanied by largely positive data across various releases. There are strong expectations that there will be no interest rate increases, with some potential for rate cuts this year.

Consumer Price Index

The consumer price index increased a mild 0.2% last month, the government said, breaking a string of elevated inflation readings since November. The rate of inflation in the past 12 months fell to 2.8% from 3.0% in January. It had slowed to as low as 2.4% early last fall before a rebound in inflation toward the end of 2024.

Producer Price Index

The flat reading in the producer-price index — helped by lower energy costs — came in under expectations. Economists polled by the Wall Street Journal had forecast a 0.3% increase. The last time the producer-price index showed so little inflation was in July. The rate of wholesale inflation in the past 12 months, meanwhile, dropped to 3.2% from a one-year high of 3.7% in January.

Consumer Sentiment

The burst of optimism following Donald Trump’s presidential election victory has evaporated. A new survey shows that Americans are worried about rising inflation due to the president’s tariffs and are unsettled by the uncertainty in Washington. According to the University of Michigan, consumer sentiment fell to a 29-month low of 57.6 in March, down from 64.7 in the previous month.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw an increase of 0.01% with the current rate at 5.80%
• 30-Yr FRM rates saw an increase of 0.02% with the current rate at 6.65%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.11% for this week. Current rates at 6.28%
• 30-Yr VA rates saw an increase of 0.10% for this week. Current rates at 6.30%

Jobless Claims

Initial Claims were reported to be 220,000 compared to the expected claims of 225,000. The prior week landed at 220,000.

What’s Ahead

The FOMC is making it’s next rate decision in the upcoming week on Wednesday. There are a number of smaller data releases surrounding the rate decision, but largely all eyes are on the rate decision.

While the data releases were plentiful, many are made less significant in consideration of the current disruption with the administration and the oncoming inflation data reports with the CPI and PPI arriving next week. The largest and most noteworthy report this time is the Job Report numbers, which will help give a clearer idea on the state of the job market. With the mass federal layoffs, there is much uncertainty, but the labor market is still holding up in light of things. The most pressing data to be released is the predictions for GDP, which has shown to have shown a deflationary value. As long as the inflation data remains consistent then there is little chance the Federal Reserve will consider increasing the interest rates once again. The silver lining in all the reports is the Manufacturing PMI data is noting that the manufacturing sector is still showing strong growth.

Job Reports

The U.S. added a decent 151,000 new jobs in February, but the labor market could soften up in the months ahead as the effects of tariffs, federal spending cuts and mass layoffs of government workers percolate through the economy.

Manufacturing PMI

The seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index recorded 52.7 in February, up from 51.2 in January. It was the second successive month that the index has pointed to an improvement in the health of the manufacturing sector, with the rate of growth the best since June 2022. Growth was underpinned by noticeable upturns in both production and new orders. There was some evidence that sector expansion was partially driven by advanced purchases ahead of likely price increases and possible supply disruption related to further tariff impositions in the coming months.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of -0.15% with the current rate at 5.79%
• 30-Yr FRM rates saw a decrease of -0.13% with the current rate at 6.63%

MND Rate Index

• 30-Yr FHA rates saw an increase of 0.05% for this week. Current rates at 6.17%
• 30-Yr VA rates saw an increase of 0.05% for this week. Current rates at 6.20%

Jobless Claims

Initial Claims were reported to be 221,000 compared to the expected claims of 235,000. The prior week landed at 242,000.

What’s Ahead

The major inflationary reports ahead this week with both Consumer Price Index and Producer Price Index are expected to come in line with the previous quarters.