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Mortgage rates fell this week, as we saw weaker than expected inflation data with CPI released on Tuesday morning. Although inflation has been falling the past few months, it is still too high for the Fed, but the trend is moving in the right direction. It feels like a good time to revisit the hard landing versus soft landing scenarios. Right now, both seem entirely plausible. The unemployment rate is low, the economy is growing at a fast pace, and inflation is falling. As we head into 2024, the question will be how much does the economy and the labor market slow. If the Fed can thread the needle and get a soft landing, which is the economy not falling into recession and inflation coming down to 2%, then the Fed can slowly cut rates in the later part of 2024. A hard landing, which is the economy falling into a recession, means the Fed will need to cut rates at a much faster pace than what they are anticipating. How does this impact the direction of mortgage prices? If the markets think we are heading into a recession, we expect the market to price in a series of fast rate cuts very quickly. If we get that soft landing, then the market will be pricing in that rates don't drop that quickly. We do expect more volatility for the near future for mortgage rates. The Fed has been data dependent for all of 2023, and the expectation remains the same we move into 2024.

• US 10-year Treasury on Thursday afternoon is at 4.44%

• CPI came in lower than analyst's expectations (+0.0% m/m vs +0.1% m/m and 3.2% y/y vs expectations of 3.3% y/y)

• Core CPI came in lower than analyst's expectations (+0.2% m/m vs +0.3% m/m and 4.0% y/y vs expectations of 4.2% y/y)

• Retail Sales came in higher than analyst's expectations (-0.1% m/m vs -0.3% m/m)

• PPI came in lower than analyst's expectations (-0.5% m/m vs +0.1% m/m)

• Initial Jobless Claims came in higher than analyst's expectations (231k claims vs expectations of 220k claims)

• Mortgage Applications rose 2.8% this week