Mortgage rates have been hovering in a narrow range for over a month, with the top 30-year fixed rate average staying within a range of just under the 7.0% mark throughout. Yesterday the figure was 7.01, but today it dropped to 6.99. This matches the level last seen on June 14th, and you'd have to go back to March to see anything lower.
After a surprisingly quiet last month, tomorrow presents another opportunity for a bigger change (or threat) in interest rates, whose movement is entirely dependent on the outcome of the Consumer Price Index (CPI).
The CPI is the most important economic report as far as interest rates are concerned because it is the first big look at inflation data for a given month, and inflation is the biggest issue for interest rates right now.
Another way to look at it is that the Fed has repeatedly stated that it will cut rates when the CPI indicates that year-over-year inflation is credibly returning to 2.0%. The last CPI was a step in the right direction. If tomorrow's CPI follows suit, the discussion about cutting rates will become serious.
Although the Fed does not directly dictate mortgage interest rates, the interest rate market as a whole tends to react to the same things that the Fed says it will react to.
As always, keep in mind that data can move in both directions. If the CPI shows higher than expected inflation, interest rates could rise just as quickly as they fall. Finally, it's always possible that the data and the market reaction to it are balanced enough that we “thread the needle” (i.e., we have days with no significant changes in interest rates).
Bottom line: Tomorrow is shaping up to be the biggest bet in terms of potential volatility.