Updated on Mar 16 2010 4:09PM EST
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Today’s FOMC meeting has adjourned with an announcement of no change to key short-term interest rates. This was widely expected, but the post-meeting statement did cause some discussion. The Fed left the language in the recent statements that indicate that rates will remain near current levels for some time. This is good news for the bond market and mortgage rates as it means that the Fed is still concerned about an economic recovery.

There is little doubt that the Fed has to raise rates sometime in the future. The question is when. Some analysts feel that it has to be sooner than later to prevent other economic issues down the road. The ultimate goal is for the economy to gradually strengthen so Mr. Bernanke and company can slowly raise interest rates. Raising rates too soon could dampen economic activity by making borrowing more expensive for businesses and consumers. However, waiting too long to raise them could let inflation build momentum, leading to a rapid increase in key rates that also undermines economic growth.

Today’s statement pretty much reiterated recent ones that hint the increases will be later than sooner. Some market analysts believe that is a mistake and that rates need to be raised this year. Others think the employment and housing sectors are still too weak to start raising rates. Who is correct? The future will show us, but in the meantime the debate will continue.

The bond and stock markets have improved from where they were before the statement was released. I would not be surprised to see a small downward revision to mortgage rates shortly as a result of the bond market strength. However, many lenders may opt to wait until tomorrow morning’s rates to reflect that improvement.

February’s Housing Starts was this morning’s only relevant economic data. The Commerce Department reported that construction starts of new homes fell 5.9% last month. The decline can be considered good news for the bond market, but analysts were expecting a slightly larger drop. Also, this data is not considered to be greatly important to the markets or mortgage rates, so its impact on today’s trading has been minimal.

The Labor Department will post February's Producer Price Index (PPI) early tomorrow morning. This index measures inflationary pressures at the producer level of the economy and considered very important to the markets. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy prices. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates tomorrow. Current forecasts are calling for a 0.2% decline in the overall reading and a 0.1% increase in the core data.

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