Market Analysis

Bond markets improved slightly yesterday afternoon in response to the post meeting Fed statement in which the Fed left rates unchanged (as expected) and kept the "extended period of time" language for the outlook for lower short term rates (some analysts had been expecting modification to this language to give the Fed more flexibility to raise rates short term rates in the near future if necessary).  It is important to note that the Federal Reserve does not directly control mortgage rates.  The rates the Fed controls are the rates banks pay to borrower money from eachother and to borrower from the Fed for very short term loans.  The market dictates long term rate levels.  Many analysts are still expecting mortgage rates to climb to the 5.5% to 6.0% level this year regardless of whether or not the Fed increases their Funds Rate this year.

In economic news, the Producer Price Index (PPI) was down .6% which was greater than the .2% decrease expected.  However, the Core PPI (excluding food and energy) was up .1% which matched expectations.