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Just how much impact did last week's economic reports have on economic opinion?
On Monday, markets expected with 24% probability that the Fed would lower the Fed Funds Rate in January.
By Friday, that decreased to 8%.
Considering that many mortgage rate locks are honored for 30 days, it should be pretty apparent why rates spiked last week. When those 30 days are up, it is far less likely that the economy will be showing signs of a slowdown.
The likelihood of a decrease at March's FOMC meeting was pretty dramatic, too. The expectation of a FFR rate decrease moved from 55% to 25%.
Remember, though: The Fed Funds Rate does not directly impact mortgage rates. Why the FFR matters to mortgage markets is the same reason why it matters to everyone else. Increases in the FFR are in response to inflation; decreases are in response to recession. The FFR is the Fed's signal to global markets about our economy's health.
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator click to get a free, no-obligation rate quote.
You can also find Dan on Twitter and Google+.
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