CPI Shows Inflation Pressure, FOMC Cautious About Future Rate Cuts

By:
Paul King | February 20, 2008
Bonds opened up today in spite of the stronger than expected than CPI results. Rates will drop today by about .5 to the points, due to weakness in yesterday's afternoon trading. January's CPI came in stronger than expected. The Consumer Price Index is a critical measure of inflation at the level of the consumer. This is bad news for mortgage rates as it indicates that inflation risk is stronger than expected. January Housing Starts showed an increase over December but still slightly lower than projected. The minutes from the FOMC meeting were released this afternoon and revealed that the Fed will consider future rate cuts more cautiously and in balance with the impact they may have with the larger economic situation, especially the inflationary pressures underscored by today's CPI report. Tomorrow we'll get the Leading Economic Indicators (LEI) report for January from the Conference Board. This report attempts to predict economic activity over the next 3-6 months.

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