Rate Update December 16, 2009

Mortgage rates are unchanged so far this morning.

This morning’s Consumer Price Index Report (CPI) showed that prices at the retail level of the economy rose in line with expectations last month.  This eases concerns over inflation pressures stemming from yesterday’s Producer Price Index Report which showed prices at the wholesale level rising much faster than expected.  Since inflation is the primary factor that drives long-term interest rates this morning’s report is good news even though we haven’t seen mortgage rates move lower.

Later today the Fed will make their post-monetary policy statement.  Their comments always have the ability to impact the markets.  Analysts will be listening for clues on how quickly they may start raising short-term rates.  Will it be Q1 or Q4 2010?  Wait and see….

For now we are going to recommend a floating position in the hopes that this morning’s CPI report helps the mortgage-backed bond market fully recovers from yesterday’s losses.

Current outlook: cautiously floating