Industry News
Mortgage Industry News
Rates Lower on Global Events
03/18/2011
World events overshadowed domestic news in driving mortgage rates this week. The disaster in Japan and the violence in the Middle East helped push mortgage rates a little lower. Stronger than expected US economic data had just a small impact.
The current environment is rare in that unrelated events in different parts of the world are exerting such a strong influence on US mortgage rates. While global economic growth rates are always a significant factor, they generally shift at a gradual pace. What makes the disaster in Japan so unusual is that it produced a very abrupt decline in the economic outlook for Japan. Slower economic growth in Japan will likely contribute to slower US growth, which is favorable for mortgage rates. Uncertainty in the Middle East is also favorable for mortgage rates, as it leads to higher oil prices which slow economic growth. Changing conditions in the Middle East pushed rates in both directions during the week as violence increased in Bahrain, but may be diminishing in Libya.
A week with a packed economic calendar and a Fed meeting was pushed to the background by the news from other countries. This week’s generally stronger than expected economic data might otherwise have caused mortgage rates to move higher. Rising food and energy prices produced higher than expected inflation readings in February. Core CPI inflation, which excludes food and energy, rose just 1.1% from one year ago, but it has been moving higher in recent months. The Fed statement contained no surprises and produced little reaction.
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