ECONOMIC UPDATE -- LAST WEEK'S REPORT

As expected, the Federal Reserve raised the federal funds rate -- the interest rate on overnight loans between banks -- by another quarter point to 5%, marking the 16th consecutive increase dating back to June 2004. The Fed indicated May 10th that further credit-tightening "will depend importantly on the evolution of the economic outlook."

Retail sales rose by 0.5% in April after a 0.6% advance in March, the Commerce Department reported May 11. The April increase was weaker than the 0.8% that Wall Street had been expecting. Excluding gasoline sales, retail sales rose 0.1% in April, an indication that the big price jump at the pump since early March was depressing demand for other consumer products.
The U.S trade deficit improved for the second straight month, something that hasn't happened in two years. The Commerce Department reported May 12 that the gap between what the country sells abroad and what it imports narrowed to $62 billion in March, a 5.5% improvement over February's $65.6 billion deficit.

For the week ending May 5, the Mortgage Bankers Association's index of applications to buy a home or refinance an existing loan declined 5.8% from 596.8 to 562.1, its lowest level since February. Rates on 30-year and 15-year fixed-rate mortgages, however, were slightly down for the week ending May 11, according to Freddie Mac.

(Courtesy of Louise Rose, ELB Mortgage Brokers)