Although the loss of 51,000 jobs was lower than the expected 75,000, it seemed to be enough to hold rates steady on Friday and finish the week off with rates slightly lower than where they began.  The week ahead features two key events, the first will be released on Monday, via the Core PCE (Personal Consumption Expenditure) Report and the second will be the Fed's scheduled meeting slated for Tuesday. So how will these key events effect rates? 

Last week, lower rates managed to hold on as the economy shed less than the expected amount of jobs in the month of July.

The week ahead, all investors will be focused on Monday's Core PCE report, the Fed's favorite measure of inflation and the Fed meeting scheduled to conclude on Tuesday.  With recent comments from several Fed Governors that indicated the Fed should raise rates, most analysts believe the raise won't be until the end of the year.  Keep in mind, if inflation is perceived to be a threat when the Fed actually does raises rates it will likely drive down mortgage rates.   

However, if the Core Year Over Year (YOY) PCE indicates inflation and the Fed takes no action, that will likely drive rates higher. Remember, inflation is the arch enemy of bonds, so if the market perceives inflation and the Fed fails to act, rates will increase.

The bottom line: If Core YOY PCE ends up higher than 2% and the Fed does not increase rates it is likely rates will move higher. However, although we think it unlikely, if Core YOY PCE comes in under 2% rates may actually improve.