In a semi-surprise move last week, the Federal Reserve lowered the Fed Funds Rate by 0.500%.
The Fed wants to prevent a dramatic economic slowdown that started in the housing sector and appears to be spilling over into other sectors now, too.
According to some pundits, the half-point FFR drop was exactly what the markets needed — it restored confidence and promoted liquidity.
According to others, though, the Fed bailed out risk-takers and may have re-ignited the flames of inflation.
It’s hard to tell which side is correct, so we’ll have to believe that both sides have valid points worth considering.
And, like the market players themselves, the best course of action now is keep an eye on economic data and try to interpret what it foretells about the future.
This week, we’ll see a bevy of inflation-related data come down the pipe:
- Consumer Confidence (Tuesday)
- Existing Home Sales (Tuesday)
- New Homes Sales (Thursday)
- Consumer Sentiment (Friday)
- Personal Consumption and Expenditures (Friday)
Each of these data points has an impact in its own right, but the PCE is a known favorite of the Fed. If PCE comes in higher than expected, mortgage rates will likely increase in response.
At least until the market regains a sense of balance, expect an over-reaction to most newly-released data. This could present some terrific (or terrible!) opportunities to lock in mortgage rates.