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While consumers certainly struggle with higher gas prices, longer-term inflation trends generally are more influenced by other factors such as wages and housing costs, which recently have been increasing very slowly.
Even with higher energy prices, consumers continued to spend freely on other items last month. The March sales figures from about two dozen large retail chain stores released on Thursday were stronger than expected. Consumer spending accounts for about 70% of economic activity, so this data was encouraging news for the economy.
The Jobs Report for March was released on April 1, and that’s no joke. But did the numbers give us something to smile about?
That is because home loan rates are tied to Mortgage Backed Securities, which are a type of Bond. So as Bond prices improve, so do home loan rates. The simple truth is when inflation or just the fear of inflation grows, both Bonds and home loan rates take a turn for the worse. That’s because lower Bond prices are needed to give Bond investors juicier yields that will help out-pace inflation.