Weekly Mortgage Rate Commentary

by Paul Cantor

With very little economic data last week, mortgage rates continued to move downward after the previous week's lackluster employment report. The Federal Reserve's recent moves, in conjunction with several other countries' central banks' actions, are beginning to have a positive impact on interest rates. The Fed has already announced additional funding for its short-term auction facility, which allows banks to borrow from the Fed anonymously, enabling them to make more loans.

A flood of important economic data is due this week, including retail sales data, industrial production data, housing starts, and both the Producer and Consumer Price Indices. While all of these are very important, the CPI may be the big driver of mortgage rates this week and next. With clearer signs of economic slowing, the market has begun pricing in a ¼ point or better rate cut from the Fed. If inflationary pressures do not advance more than expected, the Fed will have an easy argument for a '/z point cut to stimulate economic activity, and rates should continue to drift downward.