The Federal Reserve aims to maintain an annual inflation rate of approximately 2% at the core level, which is an economic measure that excludes volatile components such as food and energy prices. The Consumer Price Index for this month indicates a core level of 0.4%, which is not expected to persist. However, if such inflation continues for a year, it would result in a core reading of 4.8%. The Fed expects inflation to fall in line with 3.5% by year-end and return to the 2% range next year before easing rates. Until this happens, the Fed will periodically raise overnight lending rates, which will continue to exert upward pressure on long-term rates such as mortgages. Markets can immediately adjust mortgage rates based on future expectations. The recent CPI data implies that markets now expect the Fed to maintain the ceiling rate longer, leading to a predicted Fed Funds Rate of slightly over 5% through December 2023, higher than the earlier estimate of 4.5%. Consequently, mortgage rates have increased by about half a percent, returning to the upper-middle 6% range.
https://www.mortgagenewsdaily.com/markets/mortgage-rates-02142023