- September 17, 2007
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Phoenix mortgage rates may rise when the Fed comes out of the Open Market Committee meeting, tomorrow. Lock-in all loans at application. Most pundits believe the Fed will cut rates .5% while a smaller number are looking for a .25% rate cut. (I am in that smaller number). Here’s why:
Bernanke recognizes that the economy is slowing. He also recognizes that there is upwards pressure on prices from basic commodities- oil, housing materials, and food. That’s called cost-push inflation. Cost-push inflation, simultaneously existing with a declining gross domestic product, is the definition of stagflation. Stagflation is the absolute worst of both worlds; a recession with accelerating prices.
Stagflation is what gentle Ben is concerned about. While the Wall Street traders believe he’ll aggressively cut rates to save the economy, I think he’s concerned about the potentially devastating effect of stagflation. He’ll tale some short-term heat for not cutting rates quickly but he’ll make the right long-term decision by showing temperance.
That means that Phoenix mortgage rates could rise tomorrow. Again, it’s all about the risk. We strongly suggest that home buyers lock-in interest rates at application.