Core Consumer inflation for August was .1% leaving the year over year core inflation number at 1.8%. Still within the Fed target 1.0-2.0% range. This was welcome news and could mean continued cuts for the Fed short term interest rate. Also last week, consumer spending increased, durable goods sales increased and personal income grew at its lowest rate in a year.
Economist and forecasters are expecting the housing slump to continue through at least the first half of 2008. With the large inventory of houses they say we have not reached bottom yet. There is also still unrealized exposure to the mortgage crisis within corporations and hedge funds. These factors along with lingering investor fears over the risk of mortgage-backed securities will continue to limit buying and lending opportunities.
This Friday hourly earnings, unemployment rate, and jobs will report. Should these reports meet expectations we can expect little change in the markets and mortgage interest rates. Thank you for the opportunity to serve you and your clients.