With so many variables to consider - employment, sovereign debt, political rang lings’, and on and on - managing interest rate risk and helping our borrowers with their decisions on Austin mortgage rates is very hard to handicap. Best advice is to use any rally to lock your interest rate in!
On a side note, Philadelphia Fed President Plosser (who will not be a voting FOMC member until 2011) said: "Looking ahead, I see an economy that will be growing over the next two years, which means real interest rates will be rising… the federal funds rate should be permitted to rise with them." He said that higher rates may be needed before the unemployment rate and resource utilization return to desirable levels.
Rumor mill bantering is talking about the Fed using “Reverse Repos” to drain dollars out of the system, taking away excess reserves. In general, this exercise is nothing new if explained in the proper context to the market. If it is labeled a policy change, the market will feel that this is the beginning of a shift in policy, one towards tightening/removal of accommodation. English translation would means higher interest rates. This kind of shift would cause forced selling in both bonds and stocks and not treat us mortgage types well. We believe it is a little too early in the recovery cycle for this type of policy change, given our current level of unemployment along with a number of other fragile components of the economy. No doubt the Fed is walking a tight rope, trying to sound confident and optimistic while still keeping the training wheels on the economy.
