This is a stagflation fear we’re seeing:
The central bank can’t be “complacent about inflation,” Janet Yellen, President of the Fed Bank of San Francisco, said in a speech yesterday. Recent measures of consumers’ outlook for prices “highlight the risk that our attempts to deal with problems in the real economy could lead to higher inflation expectations and an erosion of our credibility,” she said.
Yellen also said she anticipates inflation will slow as the labor market weakens and “commodity prices level off,” echoing comments by other policy makers.
Investors project the Fed will keep the benchmark interest rate unchanged at its next meeting on June 25. That would be the first pause since the central bank started cutting rates in September.
Rising prices from overseas, reflecting the drop in the dollar, are another source of concern. U.S. businesses have leeway to boost prices as companies abroad charge more.
The mortgage markets will overreact for the next 5-10 days. Mortgage rates should shoot up quickly.
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thanks, Brian, I’ll pass this along. An investor friend the other day was telling me predicts a rise.
May 14th, 2008 at 7:50 pm
Mortgage markets overreact??? No way. Thanks for the heads up I will pass this along to a few clients.
May 15th, 2008 at 8:02 am
I was early on this. As rates have improved, I thing the risk of higher rates is even greater. I reiterate the lock all loans recommendation
May 15th, 2008 at 10:08 pm