After trudging along in a relative flat line over the last two weeks, the price of mortgages yesterday took a dive below the 100 day moving average. Ordinarily that’s a big deal, but the technical picture holds no water compared to the comments that will come from the Federal Open Market Committee tomorrow afternoon–including whether or not they raise interest rates after holding to a 0-0.25% range for the last seven years. I know that yesterday I said that those comments were coming today, but I forgot what day it was.
Fundamentally, the economy is just so-so, which is the source of the debate over whether to hike rates or not. On the plus side today, you have the National Association of Home Builder’s Index rising to a 62, the highest level in a decade and over the expectation of 61 (50 is the baseline for positive sentiment with the NAHB Index). In the so-so category you have the Consumer Price Index, the headline reading of -0.1% and the Core reading of +0.1% (Core strips out stuff we don’t really need like food and energy). Tomorrow we’ll see the Fed’s written statement to see if they hike rates or not. Remember that the Fed Funds Rate is the rate which depository institutions can lend balances to each other overnight–that’s it; that’s the only index that the Fed controls. The free market regulates rates on all of the other debt instrument based on perception.