Last week, a ranking Fed official delivered a “wait-and-see” speech on inflation and that roiled the mortgage markets plenty.
After sitting in a tight range for Monday through Wednesday, rates exploded higher Thursday as markets abruptly changed their expectations of growth for the rest of 2007.
Despite weak housing numbers, employment and consumer spending figures remain elevated.
With a plethora of relevant data coming down the road this week, expect mortgage rates to vary wildly from day-to-day. This may be one of those weeks when a bird in hand is worth two in the bush, with respect to mortgage rates.
We should see some significant movement today after this morning’s new data on personal consumption. The figures showed:
- Personal income is increasing
- Personal spending is declining
- The Fed’s preferred measure of inflation — Personal Consumption Expenditures — is showing signs of tempering
These data points are a mixed bag for mortgage rates and should help to trend rates lower today and tomorrow, but there are still a lot of questions about the economy.
With oil prices fluctuating wildly, questions about the weakening dollar, and a Capitol Hill showdown surrounding Iraq and a military budget, there are significant external risks that can shake up mortgage rates this week — for better or for worse.
One way in which mortgage rate shoppers could be aided would be if traders suspect that the oil supply will be in any way constricted. That should cause oil prices to climb which will cause mortgage rates to fall in response.
Of course, the markets could move the other way, too.
By Thursday afternoon, expect mortgage rates to fall into a lull as traders await Friday morning’s jobs data. Analysts are calling for 100,000 new jobs created in March and a 4.5% unemployment rate, both weaker than in February.
If either data comes in stronger than expected, mortgage rates will increase as the Fed’s “wait-and-see” moves towards a “waited-and-saw… and we were right about inflation.”
