The economy is growing with surprising stamina, and inflation is sticking around. Those signs point to an increase in mortgage rates in August.
Interest rates stay up when the economy is expanding vigorously and inflation is high. Eventually the economy will cool off and the inflation rate will take an unmistakable turn toward the Federal Reserve's goal of 2%. But those economic indicators are unlikely to show up in August. Until they do, there won't be much to compel mortgage rates significantly lower.
Rapid economic growth is great if you're cheering for a strong economy and plenty of job creation. But the central bank is looking for a slowdown. The Fed expects a victory over inflation to require"below-trend growth and some softening of labor conditions," in the words of Fed Chair Jerome Powell, speaking at a news conference July 26 after the Fed raised short-term rates by a quarter of a percentage point.
There you have it."A long way to go" doesn't sound like an expectation of lower mortgage rates in August.
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