Today the Bureau of Labor Statistics reported that the Consumer Price Index (CPI) declined 0.1 percent in April, which is below economists’ median expectations of a 0.1 percent increase. This suggests that inflation is in check, and there should be little pressure on the Federal Reserve to raise interest rates in the near future. While we expect to see continued volatility in mortgage rates in the near future, it appears unlikely they will increase on account of Federal Reserve actions.
For almost a year the Federal Reserve has pledged to keep rates exceptionally low for “an extended period”, although they warned that inflationary pressures could cause them to take action and tighten monetary policy. With the country’s production far below capacity, and a continued high unemployment rate of 9.9 percent, the Federal Reserve will likely maintain low current interest rates. This afternoon we will have a breakdown of the minutes from the last Federal Open Market Committee meeting, and we will be able to see if the Fed is any closer to changing any of its language regarding rates.
The European Debt Crisis will likely serve to further dampen inflation. While a stronger dollar will stifle the cost of imported goods, a weakened Euro will hurt U.S. exports to Europe. These two effects should counteract one another to hold prices in place.
Loading ...
RSS feed for comments on this post.
Leave a comment