Since Feb 5th, mortgage rates have increased approximately 50bps, or one-half of one percentage point. An economic stimulus package signed by the president, further rate cuts by the Fed as a foregone conclusion, and a smattering of not-great-but-not-as-bad-as-expected economic reports have led many market players to conclude that the economic slowdown we are experiencing will be relatively short lived.
Put another way, rates rising at this point can be taken as sign that the market believes the economy will recover quickly, perhaps stirring up a little inflation along the way.
The holiday shortened week sports an economic calendar with high-impact reports that will be scrutinized for signs of economic weakness. The two big reports to watch:
- On Wednesday the 20th: We have inflation data in the form of the CPI (consumer price index.) A hot number here could push rates up.
- Thursday the 21st: brings the minutes from the last Fed meeting, which will be parsed as always for clues as to the Fed’s views on the economy, rate cuts, and inflation. Look also for some insight into the emergency 75bp rate cut.
And of course, the market has the Philly Fed index, Leading Economic Indicators and a raft of housing related data (NAHB index, building permits, housing starts) to sort through, so we could be in for a volatile week.