Mortgage markets lost ground last week on inflation concerns and a general feeling that “the worst may be over” on Wall Street.
As investors moved money into the stock market, mortgage rates ticked higher for the second straight week.
The biggest story from last week was the rising cost of gasoline.
Rising energy costs combined with rising food prices are creating worries about the American consumer’s ability to spur the economy forward.
That sets up the biggest story of this week — the Federal Open Market Committee meeting.
The FOMC starts a 2-day meeting Tuesday and is widely expected to lower the Fed Funds Rate by 0.250 percent at its adjournment.
Cuts to the Fed Funds Rate are meant to promote growth in the economy by decreasing borrowing costs for businesses and consumers. For example, credit card rates are tied to the Fed Funds Rate so when the Fed Funds Rate falls, American households pay less interest and (theoretically) have more money to spend on “things”.
But the FOMC meeting is not the only big news to watch for.
On Thursday, the Personal Consumption Expenditures data is released. PCE is the Federal Reserve’s favorite inflation gauge because it’s a smarter version of the “Cost of Living” index. If PCE rises more than expected, it’s an indication of inflation and inflation tends to make mortgage rates rise.
Then, on Friday, it’s the jobs report. The economy is expected to post the fourth consecutive month of negative job growth. Markets have been highly sensitive to the jobs data lately so expect wild swings in mortgage rates in its wake.
And lastly, sprinkled throughout the week, more than 100 influential members of the S&P 500 will report their earnings. If earnings and outtlooks are strong, mortgage rates should rise. If earnings are weak, mortgage rates should fall.