Rate Update May 1, 2008
As you’ve likely heard the Fed did cut short-term interest rates by .25% yesterday. If you read yesterday’s ‘rate update’ you knew this would happen. We also explained that there were two scenarios that might play out in their post-meeting statement. It turns out that one of the two scenarios did take place. Here is a summary:
*If the Fed stresses concern about inflation in their statement over economic recovery it is likely a sign that the Fed is done cutting rates in the near-term. Although concern over inflation is bad for mortgage rates because the Fed is indicating that that they’ll pause it could actually strengthen the US Dollar and help mortgage rates.
Essentially the Fed indicated that they are likely done cutting rates unless something drastic occurs.
Today the Personal Consumption Expenditure Price Index (PCE) was released and showed inflation in line with analyst’s expectations.
Tomorrow the monthly jobs report is due. As a reminder, analysts will be looking at the number of new jobs created in the economy. Typically, when this number beats expectations rates worsen and vice versa. Watch today’s you tube video for our advice on whether or not to lock……
Current Outlook: locking in near-term, floating long-term