It’s pretty clear that Fed Funds rate correlates with short term rates as shown above. The reason is that it correlates strongly with the 1-year LIBOR, an index commonly used for ARM loans.
Below is a hack job on a chart (no time to find data and do my own excel job).
HLS – Your statement is true regarding FFR being a poor indicator or predictor for 30-year fixed rates. However, ADJUSTABLE rates are strongly affected by FFR. And I think we have found over the past few years that adjustable rate mortgages can have a profound impact on housing.
[img_assist|nid=4846|title=Crappy chart|desc=Do Fed Funds rate correlate with indexes commonly used in Mortages ? They sure do.|link=node|align=left|width=466|height=349]
