Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.
The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.
In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months.
“If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC in Charlotte, N.C., who formerly worked at the Fed in Washington.
Source: Bloomberg, Bob Willis and Anthony Feld (05/28/2010)
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