Saturday Morning: As Mortgage Rates Spike, Hope For Rate Cuts Clings to Life

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As we wrote last week, there is still some debate on the Fed’s next move -- we cited Wild-Eyed Jim Cramer of CNBC in the ‘Fed Will Cut’ camp. Today Tom Petruno finds other evidence, and hope, for a rate cut, writing, ‘some analysts still insist that lower rates are just a matter of when, not if.’

More: ‘Many analysts believe that the slumping housing market and high gasoline prices will be major drags on consumers’ mood and their spending this year, and that the economy will need lower rates to avoid falling into recession in 2008.

Which analysts? Bill Gross of Pimco ‘said he still expected the Fed to cut short-term rates later this year because ‘we continue to see a weak U.S. economy, based upon housing.’’ ... and David Rosenberg of Merrill Lynch ‘told clients in a report Friday that lower rates had been delayed rather than derailed’ -- delayed to early 2008.

Fallout from the recent spike: ‘Homeowners with adjustable-rate mortgages that reset in the second half already were facing a steep increase in payments; rising interest rates could make it harder to refinance.... ‘’The Fed has yet to see the fallout from the housing market,’ said Michael Cheah of AIG SunAmerica Asset Management.

Your thoughts? Again feel free to recommend Fed-watchers whose timely opinions we should monitor. Email lalandblog@yahoo.com

Graphic credit: LATimes