Good news has been coming in for mortgage rates. The latest Consumer Price Index and Producer Price Index reports both came in cooler than expected. That has helped mortgage rates improve as the markets adjust their expectations around inflation and future Federal Reserve policy.
But before we celebrate too much, it is worth looking a little deeper. There are some interesting dynamics playing out behind the scenes that could impact what happens next.
Lower CPI and PPI Are Giving Rates a Boost
Mortgage rates move based largely on expectations about inflation and the Federal Reserve’s response to it. When inflation runs hot, rates tend to rise. When inflation cools, rates can improve. That is what we are seeing now.
Both CPI and PPI reports showed that price pressures are easing a bit. Markets reacted positively, and mortgage rates have seen some relief as a result. Lower inflation means the Fed is less likely to keep rates elevated, and that has given mortgage-backed securities a lift.
Why Has Inflation Stayed in Check? Inventory Hoarding May Be Part of the Story
One interesting factor that may be keeping inflation lower is the way companies stocked up on inventory earlier this year. Many businesses increased their inventories ahead of the April 2nd tariff changes and supply chain shifts. This has left some companies with excess stock.
Because they are holding larger inventories, many companies have not been able to fully pass along price increases to consumers yet. They need to move through their existing inventory first. This dynamic has likely helped keep prices stable for now.
We Still Do Not Know Exactly How This Will Play Out
While the current inflation data is encouraging, there is still uncertainty ahead. We do not yet know how quickly companies will burn through their excess inventory. We also do not know how sticky inflation could be once supply and demand begin to rebalance later this year.
Markets are watching closely, and so are we. Mortgage rates could remain volatile as more data comes in. But right now, buyers have a window of opportunity to take advantage of lower rates.
The Bottom Line
Lower CPI and PPI data have given mortgage rates some breathing room. Companies hoarding inventory earlier this year may have also helped keep prices in check for now. But the story is not over. More data is coming, and the markets will continue to adjust.
If you are thinking about buying or refinancing, this is the time to stay informed and be ready to act. We are here to help you make smart moves in this changing market.
Sean Zalmanoff 6/21/2025
