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Real Estate Chart of the Day
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This chart shows the market's predictions of the Fed Funds Rate at the FOMC's December meeting. It probably looks like gibberish to you, so let me briefly explain what we can all glean from it.
By looking at the line graphs of 5.00% and 5.25%, we can see why mortgage rates have headed higher this past week after touching on 6-month lows.
At the date of the first yellow line -- labeled "Employment Situation" -- you can see the market's prediction of where the FFR will be in December 2006. The markets were 85% certain of "no change" to the Fed Funds Rate. Today, it's about 90%.
However, even as we watch long-term trends, it's the spikes in the chart that give it meaning. Those spike correspond to "shocks" to the expectations of market players.
Witness:
It only takes one surprise to alter the market's expectation and, therefore, your mortgage rates.
Source Fed Fund Probabilities:: Current The Federal Reserve Bank of Cleveland, October 11, 2006 http://www.clevelandfed.org/research/policy/fedfunds/Index.cfm
Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. Email Dan ator click to get a free, no-obligation rate quote.
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