Houston's Rate Sheet

Bernanke is OK with me

Federal Reserve Chief Ben Bernanke provided some positive guidance to the markets today. Bernanke's comments indicated that the Federal Reserve may take a breather from their 22-month rate hike streak. Bond investors thought this was great news. According to Reuters, the Benchmark 10-year notes rose in price for a yield of 5.08 percent, from a yield of 5.12 percent just before Bernanke's remarks. Bond prices and bond yields move in opposite directions.

Hopefully, this will help slow the rate of increase on mortgage rates. Bankrate.com's weekly national survey of large lenders resulted in a 6.64 percent average on the benchmark 30-year fixed rate mortgage, up 7 basis points from the previous week's survey. This is the highest the 30-year fixed rate has been since June 12, 2002.

Here's some further analysis of the Fed Chairman's comments from Reuters:

Federal Reserve Chairman Ben Bernanke on Thursday said U.S. interest-rate rises will be increasingly driven by economic data and policy-makers could at some point pause in their 22-month credit-tightening campaign to assess the outlook.

"Future policy actions will be increasingly dependent on the evolution of the economic outlook, as reflected in incoming data," Bernanke said in testimony prepared for delivery to the congressional Joint Economic Committee.

He said it seemed "reasonable" to expect U.S. economic growth to moderate toward a more sustainable pace as the year progresses, but the Fed's policy-making committee must still remain vigilant on inflation.

"Even if in the committee's judgment the risks to its objectives are not entirely balanced, at some point in the future, the committee may decide to take no action at one or more meetings in the interest of allowing more time to receive information relevant to the outlook," he said.

Bernanke said any decision to take a break in the Fed's interest-rate rising campaign would not preclude action at subsequent meetings.

posted by Vincent Biondillo @ 9:30 AM