(NerdWallet) – The economic calendar in March is not friendly to mortgage rates. There’s not much on it to motivate rates to fall. After rising sharply in February, mortgage rates are more likely to level off or go up a little more.

Three dates on the economic calendar will dominate the outlook for mortgage rates:

• March 10 will bring the jobs report for February. The mortgage market and the Federal Reserve will pay attention to hourly wages and the number of jobs created.
• March 14 is the release date for the Consumer Price Index for February. It’s unlikely to reflect a major slowdown in the inflation rate, so it’s unlikely to give mortgage rates room to drop.
• The Fed’s next monetary policy announcement is due March 22. The central bank is expected to raise short-term interest rates, and the big question is how aggressively it will act.

Employment will set the tone

The February jobs report could set the tone for the rest of the month. Sunny news for jobs could spell cloudy news for mortgage rates. Consider the words of Fed Chair Jerome Powell after the latest monetary policy meeting. In a news conference, he noted that job gains had been robust in recent months and added that “the labor market continues to be out of balance.” Later, he said there were 1.9 job openings for every person looking for work, which explained why he believed the labor market was unbalanced.

Powell implied that the Fed wants to bring down the ratio of job openings to job seekers, which means it wants the economy to create fewer jobs. In turn, that would cause a slowdown in wage increases, which the Fed wants as part of its inflation-reduction strategy.

Fed focuses on prices

As for the CPI, the year-over-year inflation has not declined as much as the Fed wanted. A preliminary indicator — the Cleveland Fed’s inflation “nowcast” — shows it was running over 6% in February. That’s far too hot for the Fed’s comfort.

The Fed’s monetary policy committee has been raising short-term interest rates for a year, and it doesn’t seem ready to hit the pause button. So the question is whether it will raise the federal funds rate by one-quarter of a percentage point or one-half of a percentage point. The possibility of a half-point increase may be enough to prevent mortgage rates from dropping before the Fed meeting.

If this forecast is wrong — if mortgage rates fall before the Fed meeting — it will be in reaction to an abrupt decline in job creation, a slowdown in wage increases or a surprising respite from inflation.

What happened in February

We predicted that mortgage rates “could decline in February as the Federal Reserve writes the next chapters of its inflation-busting campaign.” The prediction was wrong about rates. The 30-year fixed-rate mortgage rose more than one percentage point in less than three weeks, from a 6.002% annual percentage rate on Feb. 2 to 7.012% APR on Feb. 22.

Rates went up because the economy is creating lots of jobs, and workers are getting raises. The worker-friendly economy keeps the inflation rate high, and inflation drives mortgage rates higher. And then, the Fed raises short-term rates to slow inflation.

Mortgage rates started rising early in February after the Bureau of Labor Statistics reported that the economy had grown by a net 517,000 jobs in January and that average hourly earnings had increased by 4.4% over 12 months.

You might be glad that your neighbors are getting jobs and raises, but the news is dispiriting to bond markets, where mortgage rates ultimately are set. The markets worry about inflation when companies create jobs and compete for employees by raising wages.

It turns out that the worries were warranted. In the middle of February, the Bureau of Labor Statistics announced that overall prices had gone up 6.4% in the 12 months ending in January. That’s considerably higher than the Fed’s inflation goal of 2%. Forecasters speculated that the central bank would respond by raising short-term interest rates more than previously predicted.

All of these factors — strong job creation, workers getting raises, stubbornly high inflation and the prospect of more rate increases by the Fed — worked together to push mortgage rates higher in February.