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This Past Week's Economic Summary...interpreted my your's truly.

By
Mortgage and Lending with Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 NMLS ID# 158606

The week's headline economic report showed that inflation rose far more than expected in July, yet mortgage rates barely reacted and ended the week essentially unchanged. Bizarre to say the least.  The July Consumer Price Index (CPI), the most widely watched inflation indicator, rose at the fastest annual rate since 1991. The core rate, which excludes the volatile food and energy components, rose at a 2.5% annual rate. The Fed's perceived comfort level for core inflation is between 1.5% and 2.0%.

Mortgage rates usually move higher after an unexpected increase in inflation. This time they did not. Investors have started to expect that inflation levels will diminish later in the year and point to a couple of factors. First, slower economic growth in major global markets will reduce demand for goods and energy. In addition, a stronger US dollar will lower the cost of imported goods.  Overall...I'm sure that there's not a lot of economic confidence that wuold indicate a strong economy and higher rates....rather markets might be depressed leading to stable or lower mortgage waits...we'll see.

Even the Fed's Stern, noted for his vigilant anti-inflation stance, stated that he expects inflation to come down after the third quarter. To summarize, economic weakness at home and abroad, a stronger dollar, and a decline in oil prices offer hope that future inflation levels will be lower.

The Economic Calendar will be very light next week. The Producer Price Index (PPI) will come out on Tuesday. PPI focuses on the increase in prices of "intermediate" goods used by companies to produce finished products. Housing Starts will also be released on Tuesday. Leading Indicators and the Philadelphia Fed index will come out on Thursday.

Wierd to say the least....but definitey worth noting....

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Comments (1)

Eric Egeland
RE/MAX SUBURBAN - Libertyville, IL
SFR, e-PRO, CDPE

Thanks for the post Larry.

Great information here....keep the info coming

Aug 17, 2008 01:51 PM