Sacramento Mortgage Rate Update: Today’s Fed Meeting and PPI

While we wait for the Fed’s final decision on rates this morning (announcement at 11:15 Pacific time), we can chew on the Producer Price Index (PPI) report that preceded it.

This is a good example for anyone confused by these numbers.  The “headline” PPI figure showed a drop of 1.2% vs. the expected drop of 0.3%.  That seems like a good thing. right?.  Lower inflation means the Fed can relax about the whole inflation thing.  Not exactly.

The “core” PPI rate actually shows an increase of 0.2% which exceeded the 0.1% forecast increase, suggesting the opposite.  The inflation issue is still on the table and so bonds are down in price, rates rising this morning.

The Fed

This one has been hard to call.  The market has at times priced in an expectation of a half point cut, though there are still those who don’t think the Fed won’t (or shouldn’t) do anything.  A cut is largely considered to be a confidence booster and won’t cure the current ills.  Even a half point cut in the Fed Funds target rate won’t help those about to lose their homes, though it will offer a less painful interest rate “reset” for some borrowers.

The other wild card is just how this market will react to whatever the Fed does…   Stay tuned.

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