Last week was not for the weak-hearted as mortgage rates bounced around like a fumbled Super Bowl football. In a widely-expected move, the Federal Reserve held the Fed Funds Rate at 5.25% for the fifth consecutive meeting, stating that growth is "moderate" and that inflation pressures may be subsiding.
Consumer spending represents two-thirds of the economy and — pick your measurement of choice — consumers are doing their part to propel the economy forward. In 2006, personal income increased 6.4% over the year prior. The Personal Savings Rate, though, was down to -1.0%, the lowest since the Great Depression.
In other words, people are earning a whole lot more and spending every last penny. It’s no wonder that GDP grew 3.5% in the fourth quarter. If the spending is sustained and the economy rapidly expands, mortgage rates will move higher in response.
With a slow week ahead of us, look for the bitter cold across the country to provide fuel to oil markets, pushing prices higher.
