'Deeper economic slowdown' could come soon
Mortgage rates are holding near 5.75 percent (30-year, fixed-rate, "conforming" amount with the lowest fees), and the financial market dynamic is straightforward: as oil goes up, then stocks, the economy, and rates go down.
Federal Reserve Chairman Alan Greenspan's transient "soft patch" is muddier and wider than he insisted a month ago. CPI actually fell .1 percent last month (in a stable-price environment, as the energy component of total prices rises, the aggregate of others must fall painful for business), industrial capacity in use is tailing, and everybody's leading indicators are going flat. The exception is housing, still very strong.
There are limits to oil as a benefit to interest rates. At any moment, high and rising prices for energy can percolate into the general price structure; that brew would bring higher rates from the Fed and a deeper economic slowdown a classic stagflation.
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