While mortgage rates reached a new low for the year during the middle of the week, they ended nearly unchanged. It was a light week for economic data, and demand for the Treasury auctions was close to average, so investors had little reason to alter their outlooks.

Economic growth during the first half of the year has been slower than expected, and the consensus economic outlook is for just a modest pick up in growth later in the year, with continued low inflation. This week's Beige Book confirmed that economic growth is moderate in most regions with few inflationary pressures. In speeches this week, Fed officials agreed that the first half performance was somewhat disappointing, partly due to the earthquakes in Japan. The downwardly revised growth rates in recent forecasts have helped mortgage rates remain at low levels.

How the situation in Greece will be resolved remains a major consideration for investors, and European officials are very divided over what approach to take. The basic options are to provide a bailout package or to allow Greece to default on its sovereign debt. Due to the risk of default, weaker European countries have had to offer yields in excess of 20% to persuade investors to buy their bonds. Despite these yields, many investors have shifted funds to the relative safety of US bonds, including mortgage-backed securities (MBS). This added demand has been favorable for mortgage rates.

The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Tuesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Wednesday. CPI looks at the price change for those finished goods which are sold to consumers.