Inflation worries moved back to the forefront of concern for the market. Fed Chair Bernanke, in comments before Congress, stated that upside risks for inflation have "intensified" recently. Both the Consumer and Producer Price Indices came in with higher-than-expected headline numbers, and the CPI's core reading also came in above expectations. Housing Starts appeared to make a strong showing by increasing a whopping 9.1%. However, the number was due to an expiration of incentives to start projects in New York. Single-family home starts actually slipped downward.
While mortgage rates did bounce around last week, they are very likely to start this week on an upward slope. The week contains fewer important economic reports, but rates are likely to stay volatile for the foreseeable future. With the specter of inflation, any good economic news, such as a higher-than-expected LET or number of existing homes sold, could drive mortgage rates higher. Poor economic news will help flatten rates, but they are unlikely to slide downward very far.
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