Just one day after an article here talked about how inflation is near the Fed’s 2.00 percent target without any signs of inflation on the horizon, the CPI number was released today and it was, well, higher than expected and above the Fed’s 2.00 percent target. According to the report released by thecpi number higher than expected for May Labor Department the Consumer Price Index notched up 0.4 percent from April to May, the biggest jump since February 2013.

Pulling out the more volatile food and energy sectors and looking at the “core” rate, prices rose 0.3 percent, the highest such gain since August of 2011.

These numbers by themselves certainly don’t point to a trend but hitting levels not seen for nearly three years in the core rate will keep economists as well as the Fed on the lookout for next month’s release. Food prices rose 0.5 percent in one month for the fifth straight monthly gain and anyone who pays attention in the grocery aisle can start to recognize slightly higher prices for poultry, grains and meat.

Okay, so what does that mean for mortgage rates for the average real estate investor? Earlier today, mortgage-backed securities took a brief beating and recovered somewhat but still fell lower by 13/32. In retail terms, that’s about $250 on a $200,000 30 year loan. Not a lot, but if we see more of the same that $250 could get closer to $1,000.

The Fed began its regular two-day meetings today and we can expect another tapering of the current QE program from the $45 monthly purchases of Treasuries and mortgage-backeds to $35 billion. That would put the end of the program right around October. We could have expected rates to be even higher today than they are, given the ultimate end of the QE program but so far rates have been rather stubborn. If we see another round of selloffs in mortgage bonds over the next several days we might begin to get closer to interest rates in general being market driven rather than subsidized by the Fed.