Posted on: 11th Jun, 2008 02:05 pm
Just checking to see if there is any economic or market updates you guys would be interested in?
Alot, of new about inflation and it directly affects mortgage rates now and in the future...
Alot, of new about inflation and it directly affects mortgage rates now and in the future...
Yes i would be interested to know cliff.
The current rate of inflation implies that prices are on an upward trend but the effect it has will vary from person to person. An increase in salary can offset inflation rate. For eg, if your paycheck is higher, you can think about spending more but your income is also likely to get higher, therefore it depends as to whether your increase in paycheck can offset the inflation.
One way the federal reserve has so far dealt with inflation is by raising interest rates. When interest rates go up, inflation is lowered because people don't spend much and thus prices come down.
One way the federal reserve has so far dealt with inflation is by raising interest rates. When interest rates go up, inflation is lowered because people don't spend much and thus prices come down.
Great Mac 7:
What would you like for me to write about?
Alex 12:
Yes you are correct typically one of the tools the fed uses to offset inflation is increasing the fed funds target rate. However, so far inflation appears to be contained. It only appears to be rising because of food and gas. The federal reserve does not use food and gas prices when analyzing inflation. This is because those prices are too volatile.
What is of concern right now is "inflation expectations" and this is what drives bond markets/prices and ultimately affects mortgage rates.
What would you like for me to write about?
Alex 12:
Yes you are correct typically one of the tools the fed uses to offset inflation is increasing the fed funds target rate. However, so far inflation appears to be contained. It only appears to be rising because of food and gas. The federal reserve does not use food and gas prices when analyzing inflation. This is because those prices are too volatile.
What is of concern right now is "inflation expectations" and this is what drives bond markets/prices and ultimately affects mortgage rates.
Quite right Cliff, it's the expectation that brings changes and at times some drastic changes such that it doesn't merely affect the mortgage rates but as a whole the entire financial markets. Quite obviously as one is somehow linked with the other.
Yes Caron it is amazing how financial markets are interlinked. In addition, it is even more interesting how we can use economic models to see where mortgage rates will go in the future...