Commentary: Prices received by farms, factories, and refineries increased 0.8% last month after being flat last month. The "guesstimate" among the majority of economists called for a gain of 0.2%.
The big jump in the headline producer price index number for September was created in large part by a 4.2% increase in gasoline prices. Stripping out the more volatile food and energy costs -- prices at the producer level crept higher by a more modest 0.2% -- just slightly ahead of the consensus forecast calling for a gain of 0.1%.
In their initial reaction to this September Producer Price Index data mortgage investors considered the uptick in the overall index sufficient justification to nudge rates a touch higher. Following their early knee-jerk reaction investors have began to reverse their earlier thinking as it becomes increasingly apparent the increase in producer prices will probably be absorbed (at least temporarily) by companies looking to maintain market share or match rivals in highly competitive markets. The overall inflation outlook remains benign - a condition supportive of the near-term prospects for steady to perhaps fractionally lower mortgage interest rates.
Fed Chairman Bernanke will address a banking conference hosted by the Boston Federal Reserve later this afternoon. Bernanke will be speaking on the long-term effects of the Great Recession. His comments will certainly draw the attention of credit market participants. If, as expected, Mr. Bernanke sticks with his long-standing commitment to provide additional monetary accommodations to the financial markets should future economic conditions warrant - this event will not directly influence the trend trajectory of mortgage interest rates one way or the other.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
