Mortgage Rate Update, June 15, 2011

Mortgage rates have a myriad of influences today as several key economic reports are released.  Additionally, strikes in Greece over further budget cuts have analysts worried that the new bailout deal will fail.

Mortgage Rate Trend Direction:    Neutral/Down
Economic Reports/Rate Impact:   Consumer Price Index, 8:30 AM ET, High Rate Impact
                                                                NY Empire Index, 8:30 AM ET, Moderate Rate Impact
                                                                Industrial Production, 9:15 AM, ET, High Rate Impact
Key News:                                           Greek Protests

Summary
Mortgage rates have been volatile thus far this week.  Today should either reinforce yesterday’s increases or reverse the trend and send rates lower.  Key inflation and manufacturing data this morning indicates that our economy is facing some tough head winds.  Based on early reaction to these reports and the worker strike in Greece I expect mortgage rates to decline modestly today.

Impact of economic reports
Consumer prices are growing in the US, but the rate of growth is not significant.  Inflation tends to push interest rates, including mortgage rates higher.  The increase in the CPI is worrisome to analysts but the rate of growth tends to quell the concern.  The net effect of the key CPI report is neutral thereby increasing the impact of the news from Greece.

The NY Empire Index is a measure of manufacturing activity in the NY Federal Reserve region.  Today’s report showed a sharp decline in activity that is in line with similar reports from other reasons around the US.

The industrial production report also confirmed that the industrial sector is in the midst of a dramatic slowdown.  The debate continues as to whether this slowdown is temporary or the beginning of a new cycle.

Impact of international or political events
Workers in Greece have brought Greece to a standstill today through strikes to protest the new austerity measures agreed to by the Greek government in exchange for billions in bailout funds.  The concern is that the people of Greece may reject the deal, despite the government’s agreement.  The ultimate fear is that Greece will default on its debt and in turn the banks that hold that debt will fail that a major financial crisis will spread around the world.