"The Federal Reserve targets a 2% rate of inflation. The central bankers aren't looking for no inflation; instead, their goal is price stability. You don't like it when your grocery bill is surprisingly high, and the Fed doesn't, either. But inflation's been running above that target for almost five years. The Fed's main tool for trying to lower inflation is raising the federal funds rate, which is the short-term borrowing rate the bankers actually control. (The Federal Reserve does not set mortgage rates.)"
"That was slightly lower than anticipated - which is a good thing - but markets reacted like it was a great thing. On the other hand, though, if inflation's under control, the Fed can ease up a bit - that's why the CPI excited markets and suddenly raised the odds of a June rate cut. Mortgage rates instantly caught that spring fever, bringing us the lowest rates we've seen in more than three years."
Average 30-year fixed mortgage rates declined 16 basis points to 5.83% APR for the week ending Feb. 19. January's Consumer Price Index showed inflation easing to 2.4%, slightly below expectations, which increased market optimism and raised odds of a June Federal Reserve rate cut. The Federal Reserve targets 2% inflation and uses the federal funds rate to cool spending; the Fed does not set mortgage rates. Lower inflation expectations pushed mortgage rates to their lowest levels in over three years. Homeowners with sufficient equity may benefit from refinancing, and prospective buyers face improved borrowing conditions amid continued rate volatility.
Read at SFGATE
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