The April jobs report is a step in the right direction for homebuyers. It should cause mortgage rates to decline slightly, and it puts 2024 rate cuts more solidly on the table–but the next inflation report will be more significant for the direction of rates. After three months of hot data, we finally got a soft-landing jobs report. Mortgage rates will decline slightly after today’s weaker than expected labor market data calms fears of inflation accelerating, but ultimately Fed policy will be decided by inflation data. Every key metric in this report was weaker than expected. Nonfarm payrolls increased by 175,000 jobs, down from 315,000 in March and below the 240,000 expected by forecasters. The unemployment rate inched up from 3.8% in March to 3.9% when it was expected to stay steady. And average hourly earnings increased by 0.2% MoM (3.9% YoY), down from 0.3% MoM (4.1% YoY) in March …

In their May 1 meeting, the Fed held interest rates steady and didn’t take the possibility of rate cuts later this year off the table. For homebuyers, the meeting shouldn’t move the needle on mortgage rates; the more important piece of economic news will be the next inflation report.  The Federal Reserve announced they’re holding interest rates steady during their May 1 meeting, as anticipated. They also confirmed that the lack of progress on inflation in the first quarter means rate cuts are delayed relative to previous projections. The Fed statement and meeting contained virtually no surprises, and shouldn’t move mortgage rates much.  The Fed kept interest rates where they have been since July 2023 and acknowledged the recent lack of progress on inflation. In their statement, the Fed added a sentence saying that “In recent months, there has been a lack of further progress toward the Committee’s 2 percent …

The March inflation report came in hotter than expected, which means the Fed is highly unlikely to cut interest rates in June–and could mean the Fed only cuts rates once this year. The news is already pushing up mortgage rates.  Higher-than-expected inflation in March means that the Fed will almost certainly delay rate cuts until July or perhaps even September, and trim the number of cuts this year from 2 or 3 to 1 or 2. This will keep mortgage rates elevated for longer through the peak homebuying season. Inflation was higher than expected across the board. Overall inflation came in at 0.4% month over month, the same as last month and higher than expectations of 0.3%. Relative to a year ago, prices were up 3.5%, more than last month’s 3.2% increase and expectations of 3.4%. Because energy and food prices are volatile, the Fed prefers to strip those out …