Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on November 18, 2008

Locking Stance:  LOCKING     Mortgage Bonds:  +3bp

This morning saw the first of many glimpses into the inflation spectrum and it is almost exactly as I expected and have talked about.  While inflation on the overall spectrum has declined due to dramatic drops in food and energy (namely oil), the core level of inflation keeps on climbing.

The good thing about a mixed bag report on inflation is you can fuel either fear, that of inflation or keep the focus on recession.  This morning’s PPI release allows exactly that opportunity.  Many will focus on the fact that overall inflation at the producer level was better than expected, coming in at -2.8% versus the expectations of -1.5%.  That looks great for those, like Bernanke, whom want to keep throwing money and cutting rates to fuel the economy, and it does bode well for mortgage bonds when you look at only that side of the equation.

The problem is that when you look at the core level, what used to be the primary gauge of inflation before oil became so expensive that an overall look painted a better picture and became the “norm”, is that inflation is hardly in check.  This morning’s PPI release showed core inflation at the producer level was double what was expected, coming in at 0.4% versus expectations of 0.2%.  That means inflation beyond the drops in food and energy is still on the rise and is of concern.

Later this week we will see the CPI release and that will get the markets to react more as it shows the ability of producers to pass those increased costs on to consumers.  Later we will see the PCE which is the truest gauge, or at least in terms of what the Fed watches.

Traders are not reacting much to this morning’s report as they are not sure which number to truly focus on.  Getting back to the charts, traders should be focusing on the core side and that means higher Florida Mortgage Rates lay in waiting.

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