The Mortgage Market Report for Tuesday October 30th, 2007
Mortgage Bonds are trading slightly lower and appear to be waiting on the Fed decision.
Today is the first day of the two-day Fed Meeting. The decision and policy statement will come at 11:15am Pacific Time, Halloween.
Stocks are a bit lower today in response to a Wall Street Journal article saying the Fed may not cut rates tomorrow. I care to disagree. The Fed's main job is to fight inflation, the latest read on the Core Personal Consumption Expenditure Index, shows it is in check at 1.8% on a year over year basis. This number is not the reason for the Fed to cut, but it is within the Fed's target zone of 1 to 2%, which points to the Fed making a cut. Also, the Fed looks to continue with a healthy employment picture. Recently, the job market is sagging. Lastly, the credit crunch is still a major topic and the economy is somewhat slower due to the housing turndown. Due to these current factors it suggests that another .25% cut in the Fed funds rate will occur.
Consumer Confidence for October was reported lower than expectations. The Fed watches this carefully. The lower than desired read is another indication of a cut in Fed funds.
At this time we recommend floating ahead of the announcement tomorrow.
We will keep you informed during this wild week. Keep your seatbelts on tight as the action heats up.
Thank you for reading and we will have another report for you tomorrow.
Roger Herrick
California Mortgage Broker
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