Frank Nothaft Economic Quotations

Mortgage interest rates were up this week on news that February employment figures suggested an economic upturn. That news, however, puts a bit of upward pressure on long-term mortgage rates.

Today's annual average mortgage rates are below even that projection thanks to the spring 'soft-patch' in economic growth.

With productivity up and inflationary pressures muted, the Federal Reserve Board elected this week not to change a key short-term interest rate. Moreover, most other economic data releases, such as unemployment and manufacturing, painted a slightly negative picture for future economic growth. These factors combined to keep mortgage rates stable.

Financial markets are feeling more confident that the Fed will not raise rates any time soon. Add to that the fact that recent economic data shows core inflation is less than the market expects, and we see mortgage rates drop once again.

Currently the market is focusing on an anticipated economic recovery within the next six months. That focus put some upward pressure on mortgage rates this week, causing them to rise. There remains good volatility though, due to market speculation over exactly when and how strong the rebound will be.

There seems to be some concern in the marketplace that the economic recovery will be slower than expected , lessening the fear of inflation. As a matter of fact, personal income and consumer spending growth for the first quarter were moderate and showed inflation to be well constrained.

The escalating tensions within the U.N. over the impending resolution on Iraq and dismal economic news this week sent the stock market tumbling and with it went bond and mortgage rates. The high volatility is likely to remain for a while. But since there are no upward pressures at the moment, any sustained rise in rates in highly unlikely.