How much further can oil prices go before they seriously damage the economy. Some economist thought $110.00 a barrel might be the threshold. Well don't look know but oil, WTI (west texas intermediate crude) is over $113.00 per barrell as of this writing.
There are those camps that say inflation is not an issue for the US economy at this time. Producer Price Index and Consumer Price Index numbers still look OK provided you use the core number that strips out energy and food prices. OK, so how many of us can get by with out food, heating oil, or gasoline. Not many I suspect. So inflation may not be an issue at the immediate moment, but look out down the road a bit and the Fed could soon be joining the ranks of other central banks around the world in raising interest rates.
Interest rates moved up very quickly in December of last year. Bonds were fat with profits and traders wasted no time in running for the exits to hold on to their gains making their year end performance numbers look very good. At the end of November a 30 year fixed rate mortgage could be had in the low 4's. By the end of December, rates were rapidly approaching 5%. An unbelievable run up in rates in such a short span.
As the 1st quarter ended rates had retraced and the 30 year fixed was being offered in a range of around 4.75% to 4.875%. Today 4.75% is attainable if you are say refinancing and only need a 30 day lock. A 60 day lock for a purchase could be attained at 4.875%. Not to shabby by historical standards.
Keep your ears open as news bites come from the much awaited Federal Reserve two day meeting which begins today. Will QE2 end in June as planned? Will bond prices fall and rates rise? The ecomomies performance would dicdate that the Chairman signal an end to QE2. Markets should move one way or the other tomorrow afternoon when Mr Bernake our Fed Chairman makes known the results of the feds meeting and the direction of the Fed's monetary policy for the coming months.
Recent economic weakness aside and predictions of a lower than expected first quarter GDP, if I were in the market for a mortgage, I would be looking to lock in my rate sooner rather than later with QE2 ending and pressure on bonds and fixed investment yields to move upward from here.
