Aug 102015
 

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By G. Steven Bray

The jobs report last week was pretty much what markets expected, and rates responded with equivocation – down a little Fri, up a little today. Markets seem to be searching for direction again.

Some think that will come with the Sep Federal Reserve meeting. Most analysts are saying the jobs report was strong enough to give the Fed the green light to start raising short-term rates at that meeting, and I don’t disagree. However, I don’t agree that spells the end of low mortgage rates. The Fed directly influences short term rates. Longer-term rates, such as mortgage rates, are more sensitive to economic conditions and inflation. As we’ve discussed before, while the economy continues to add jobs at a modest pace, other measures of economic health are less robust. In particular, wage growth and retail sales both have been lackluster. Add to that a softening world economy, highlighted by a slowdown in China, and you have a good case for clouds on the horizon. Uncertainty is the friend of lower mortgage rates.

The report to watch this week is the retail sales report on Thurs. A strong report is likely to push rates up. A so-so report is likely to leave us meandering.

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