Mortgage Rate Update, June 8, 2011

In one of the slowest weeks of the year for economic data, the markets have had to focus on past data and future events.  The data in the rear view mirror indicates that the US economy is facing increasing challenges, while the events of the near future suggest that further stimulus from the Federal government may not be forthcoming.

Mortgage Rate Trend Direction:     Down
Economic Reports/Rate Impact:    Federal Reserve Beige Book, 2 PM ET, Moderate Rate Impact
Key News:                                           Bernanke Comments, OPEC Production

Summary
Yesterday went just about as I expected with mortgage rates increasing in the morning and improving by the end of the day.  The key change yesterday was Federal Reserve Chairman Ben Bernanke’s comments that suggested the economy was dramatically slowing but gave no indication that further stimulus was forthcoming.  With the focus today squarely on the economic slowdown, mortgage rates appear headed lower.

Impact of economic reports
One typically unimportant report, the Fed’s Beige Book, will be released at 2 PM.  The Beige Book is simply a summary of economic data from the regional Federal Reserve banks across the country.  The expectation among analysts is that the report will clearly show that the slowdown in the economy has been sharp and widespread.

Impact of international or political events
Chairman Bernanke’s comments yesterday afternoon could best be described as coy.  He acknowledged the slowdown without committing to a specific forecast for the future or a specific course of action for the Fed.  While he did indicate that he expects the economy to improve in the second half of 2011, he did not give much data about how that would be achieved, other than to say that some of the problems from earlier in the year (Japan earthquake/tsunami, weather, gas prices) were transitory.

Saudi Arabia is attempting to get fellow OPEC members to agree to increase oil production to help support the global economy as trouble is brewing in the US, Europe and Japan.  Some OPEC members do not appear to support this move.