Much of the confusion, economists say, results from the public's glorification of the Fed, which many Americans wrongly believe directly controls every interest rate in the economy, from home-mortgage rates to car loans. There's just no point in waiting around for the Fed to cut when you're looking at these rates. Already, many borrowers have felt at least some relief, as cuts in the federal funds rate ripple through to the prime lending rate, to which banks peg variable-rate loans. But the vast majority of housing loans are fixed 30-year rates, which have actually inched up since Jan. 1. That's because lenders use a long-term gauge.
Analysts see it as a bellwether of the economy, and mortgage rates hew closely to it.
During the same period, the Fed held short-term rates static. Last fall, for example, consumer spending slowed. Investors, worried about corporate profits, began fleeing the stock market and turned to Treasury bonds as a haven. When the Fed did act, rather than being a catalyst for lower mortgage rates, it was a reaction to the cautious economic mood that mortgage rates had already responded to. Dan Gaines has been on Greenspan watch for much of the spring.