Commentary: As expected, rising food and energy costs pushed inflation at the consumer level 0.5% higher in March. The more important core rate of inflation on Main Street (a measure which excludes the volatile food and energy components) -- rose a very modest 0.1%.
Rising headline consumer costs have more than offset recent wage increases and the one-year reduction in payroll tax to the point that the purchasing power of consumers fell by 0.6% last month on an inflation adjusted basis. Since consumers drive roughly 70% of all domestic economic activity - most analysts are busy marking down the growth expectations for the overall economy this year. The connection to mortgage interest rate levels is pretty straightforward - a slowing economy generally results in reduced demand for capital - which in turn results in steady to fractionally lower mortgage interest rates.
Looking ahead to the coming holiday shortened week - mortgage investors will have little to "chew-on" with respect to economic news. The Commerce Department will release the March Housing Starts and Building Permits figures on Tuesday and the National Association of Realtors will report on the pace of March Existing Home Sales on Wednesday. The mortgage market will close early at 2:00 p.m. on Thursday and will remain closed on Friday for the Good Friday Holiday. Under these conditions the trend trajectory of mortgage interest rates will likely be most influenced by trading action in the stock markets. Higher stock prices will tend to push mortgage interest rates higher while lower stock prices will likely prove supportive of steady to lower mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
