Refinance candidates Consumers holding those ARMs are now feeling the pinch from Fed rate hikes earlier this year which caused many ARMs to adjust up by a hundred dollars a month or more. By most assumptions, the Fed isn't likely to raise rates soon. That's because of a tamer Consumer Price Index, one of the most watched economic indicators, one that figures prominently in the Fed's monetary policy. On Aug. 16, the Bureau of Labor Statistics said the index increased only 0.2 percent in July, after increase 0.6 percent in June. When inflation appears out of control, the Fed prescribes higher interest rates as an antidote.
Higher rates cool excessive demand by making financing more costly for consumers and businesses.
The CPI was the last major economic report released before the Fed's Aug. 22 meeting. Investors and economists expect the Fed to forgo raising rates just as the central bank left the fed fund rate at 6.5 percent at its last meeting in June. Consumers buying homes, refinancing mortgages or tapping home equity should take a hard look at the possibilities now. Majestic advises home buyers and homeowners to take the savings now, because the market is unpredictable. Contrarians On the flip side, while waiting for lower rates could be a risky gamble, some say the election year could make the wait worth the bet.