Surprise, it’s back

Yes, inflation was back in the news today with the release of some key indicators the Feds use to monitor inflation. While all of these economic reports show inflation is rising, the figures were not as bad as predicted.

Inflation rose 0.3% mainly due to the increase in cost of energy (gas) and food. The year-over-year inflation figures also rose to 2.4%. While the Feds preferred target number is 2.0%, this number isn’t too bad when you consider the number of Federal rate cuts since the summer of 2007. With these tamer than expected inflation figures, the Fed may interpret that as a green light to cut rates again at the end of the month.

However, even with today’s tame inflation figures, the bond market plummeted causing mortgage rates to increase by an .125% to .25% by the end of the day. Is this a taste of things to come? I hope not!

Previous posts describe the affects of a Federal rate cut on mortgage rates - a rise in inflation. I have also blogged about how long it takes for the affects of a rate cut to really impact the market - roughly 6 to 9 months. To date, the Federal Reserve has lowered the Fed funding rate by 3%. When you consider that only a third of the rate cuts (meaning 1% of the total 3%) took place in the 6 to 9 month ago time frame, inflation figures will likely get worse before they get better. We will know for sure this summer.

Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.