The global economy has not faired much better than the U.S. economy. Last week European Central Bank raised their key interest rate to 4.25% in an effort to help curb their monetary policy. This move which many economists had expected was a direct result of the inflationary challenges that have hit the marketplace in the past three months with the rapid increase of oil prices.

The key question now is how soon will the U.S. and the Federal Reserve follow in their footsteps. Earlier this year the Fed was forced to dramatically lower the Fed Funds rate to help restore confidence and liquidity to the credit markets. The credit markets appear to have at least turned the corner, however the U.S. housing market has shown now signs of bottoming out and the job market continues to deteriorate. The economy is likely to see a slow down with spending and the Fed is likely hoping this will help them to slow down inflationary pressures, despite the damage that is being done from the rapid rise in energy prices. Mortgage rates remain relatively low and home owner who have adjustable rate mortgages are not likely to see a dramatic increase with their interest rates, but would be wise to look into locking into something more permanent.

7-5-2008©LowRateMortgage.com

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