Mortgage rates are heading into next week’s Federal Reserve meeting with unusual uncertainty, driven by two economic reports most real estate agents don’t normally track that closely.
Thursday’s producer price index and Friday’s consumer price index readings for August will likely determine whether the Fed raises interest rates at next week’s meeting. It’s a call that’s shaping up to be closer than it’s been in months, according to Redfin’s weekly economic update published Sept. 8.
Chen Zhao
The committee itself looks split. Fed Governors Christopher Waller and Michael Barr, along with New York Fed President John Williams, offered commentary last week that pushed back against the hawkish tone Chairman Kevin Warsh struck in his Jackson Hole, Wyoming, speech.
Waller and Williams — both permanent voting members of the FOMC — pointed to recent improvements in inflation, but each also signaled they’d back an interest rate hike if the August CPI reading comes in hot.
Then Friday’s jobs report complicated the picture further. Employers added 162,000 jobs in August, roughly three times the consensus estimate.
Redfin’s Chen Zhao noted some of that strength was a bounce-back from an unusually weak July rather than genuine acceleration. Still, a labor market that looks this healthy lowers the bar for what the Fed considers “too much” inflation.
Adding to the pressure, oil prices have climbed back to late-spring levels amid renewed fighting in the Middle East, another variable pushing rates higher and adding volatility heading into the decision.
The number the Fed is watching
The Fed’s preferred inflation gauge is core PCE, which won’t be released until later in the month. But CPI and PPI — out this Thursday and Friday — share the same underlying inputs and offer the market’s best early read on where PCE will land.
According to Redfin’s analysis, the outcome likely comes down to whether the implied monthly core PCE inflation figure for August rounds to 0.1 percent, 0.2 percent or 0.3 percent.
A 0.1 percent reading would make an interest rate hike hard to justify for a committee already this divided. A 0.3 percent reading would make skipping one just as hard to defend.
It’s the 0.2 percent scenario — the outcome forecasters are expecting — that makes the decision a toss-up, hinging on the unrounded number and the report’s finer details.
Complicating matters for anyone hoping for more Fed commentary before the meeting is that the committee is now in its blackout period and won’t comment publicly before the vote.
For real estate agents and lenders, the practical takeaway is that mortgage rates are likely to stay volatile through the back half of this week, regardless of how the data breaks. And an interest rate hike, rather than a pause, is now a real possibility.
The Federal Reserve’s last rate increase came on July 26, 2023, when the FOMC raised the federal funds rate by 25 basis points to a range of 5.25 to 5.5 percent, a 22-year high. That move capped an 11-hike tightening cycle that began in March 2022 to fight inflation.
Since then, the Fed has reversed course. After holding steady for over a year, it began cutting in September 2024 and has trimmed the rate six times since, most recently in December 2025. The federal funds rate now sits in a target range of 3.5 to 3.75 percent, with the effective rate at 3.63 percent.
