Economic Summary

Week Summary – February 24, 2011
Last week in review (February 14 – 18, 2011)
In early November, when home loan rates hovered around all time lows, the Fed announced their plan to purchase $600 billion in treasuries through mid-2011. Dubbed Quantitative Easing 2 (QE2), the Fed had three goals:

1. Boost stock prices
2. Lower unemployment
3. Create inflation
After just two and a half months, an argument could be made that the Fed has been somewhat successful so far. Stocks are higher, the unemployment rate has improved, and as we saw last week inflation has ticked higher.
Both the Consumer Price Index (CPI) and Producer Price Index for January were better than expected and the more closely watched Core CPI, which strips out food and energy, came in at the highest level since March 2010. And we're not just seeing inflation here. Reports last week showed inflation is heating up in Asia and Europe, too. So what does all of this mean for home loan rates? Usually any hints of inflation cause both bonds and home loan rates to worsen. Yet, bonds and home loan rates improved slightly last week.
There are two things to note:
First, while last week's inflation data was a touch better than expected, overall, it's still on the tame side.
Second, last week's initial jobless claims was a disappointment, suggesting that the labor market continues to improve but at a very choppy and sluggish pace. 

Freddy Solis. Capital Region. RealEstate.com Realtors®. 703-943-7844 Direct. 703-955-3528 Fax