Updated on January 14, 2025 10:06:03 AM EST
Decembers Producer Price Index (PPI) kicked off this week’s economic calendar, giving us some insight into wholesale inflation. It revealed inflation at the wholesale level of the economy was softer than expected with most of the readings in the report showing results that were favorable for bonds. The overall PPI rose 0.2% last month and the core data that excludes volatile food and energy prices was unchanged when they were expected to be up 0.3% and 0.2% respectively. The annual numbers didn’t hurt either since both readings came in lower than expected. Unfortunately, despite the favorable results, it appears bond traders are waiting for tomorrow’s data before responding to today’s release.
Tomorrow brings us another highly important inflation report when December’s Consumer Price Index (CPI) is released at 8:30 AM ET. The CPI tracks inflation at the consumer level of the economy rather than the wholesale level and can have a stronger impact on rates than today’s PPI release. Forecasts have the overall reading up 0.3% and the core data rising 0.2%. They also are predicting the overall reading to have risen from 2.7% to 2.8% annually but the core reading held at November’s 3.3% annual pace. This version of the data often has a stronger impact on bond trading than the PPI does, meaning we could see a bigger move in bond yields and mortgage pricing tomorrow than we did today.
The Federal Reserves Beige Book report will also be posted tomorrow. This report is named simply after the color of its cover and details economic conditions throughout the U.S. by Fed region through the eyes of their business contacts. Since the Fed relies heavily on this info during their FOMC meetings, its results can have an impact on the financial markets and mortgage rates if it reveals any surprises. Of particular interest is information regarding inflation and employment strength. It will be posted at 2:00 PM ET tomorrow, so if there is a reaction to the release, it will come during mid-afternoon trading.
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