Mortgage rates are notoriously difficult to predict. They rise and fall based on market sentiment, headlines and a variety of economic indicators. Here’s a look at what could move markets this week.

This week’s big piece of economic news comes Wednesday, when the U.S. Labor Department releases its Consumer Price Index report for December. Inflation stood at an annual rate of 7.1 percent in November — down from earlier in the year, when inflation hit its loftiest level since the stagflation days of the early 1980s.

With prices running so hot for so long, the Federal Reserve has been forced to act to cool them down. In a change in policy from the pandemic years, the Fed raised interest rates seven times in 2022. The Fed began raising interest rates at its March meeting, and the central bank continues to move assertively, increasing rates by 0.75 percentage point in June, July, September and November. Its December hike was a more modest 0.5 percentage point.

The sustained spike in consumer prices spurred not only the Fed’s aggressive moves, but a climb in mortgage rates, which reached record lows in January 2021 before rising sharply during 2022. While the rate of inflation doesn’t directly determine mortgage rates, the two are strongly correlated. Inflation — and the Federal Reserve’s response to rising prices — has in fact been the most important metric driving mortgage rates in recent months.

The calculus behind mortgage rates is complicated, but here’s one easy rule of thumb: The 30-year fixed-rate mortgage closely tracks the 10-year Treasury yield. When that rate goes up, the popular 30-year fixed rate mortgage tends to do the same.

Rates for fixed mortgages are influenced by other factors, such as supply and demand. When mortgage lenders have too much business, they raise rates to decrease demand. When business is light, they tend to cut rates to attract more customers.

Ultimately, rates are set by the investors who buy your loan. Most U.S. mortgages are packaged as securities and resold to investors. Your lender offers you an interest rate that investors on the secondary market are willing to pay.