Inflation and China

Comments from central bankers have been the driver of mortgage rates over the past few weeks, but there was little new information from them this week. The recent economic data had offsetting effects on mortgage rates. As a result, mortgage rates ended a little higher, but remain near the best levels of the year.

The trend in the inflation rate is a key factor for mortgage investors and central bankers to watch closely. After holding steady at low levels for most of 2015, U.S. core inflation, which excludes the volatile food and energy components, has risen sharply over the last few months. Thursday’s Consumer Price Index (CPI) report for March stopped that trend. Core CPI inflation was 2.2% higher than a year ago, down from a 2.3% annual rate in February.

Another important issue to watch going forward is the pace of economic growth in China. Most of the economic data out of China in recent months has fallen short of expectations. Wednesday’s trade data was an exception, however, as Chinese exports showed gains for the first time in nine months. Friday’s data on Chinese Gross Domestic Product (GDP), the broadest measure of economic growth, matched expectations with an increase of 6.7% during the first quarter. This was down from 6.8% in the prior quarter, but the pace of the decline has slowed considerably. As the second-largest economy, and with a growth rate still far above that of the U.S., China has a major impact on global inflation

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