The jobs report did it.  A stronger than expected jobs report pushed interest rates higher on Friday unwinding the bulk of the rate of reductions seen thus far in 2015.  The big data was not really the jobs gain the economy experienced in January but the upward revision the Bureau of Labor Statistics reported for the previous two months.

The strong jobs report for January combined with the previous months revision raised the expectations that there will be a Fed rate hike sooner than expected.  While this is often the commentary of loud mouthed economists, whether the Fed raises rates this year or next year is not the driving force behind interest rates. 

One need only look at the recent drop in interest rates over the past three months to see that the Fed may influence rates but is far from the only force pushing and pulling on consumer lending and savings rates.  If the Fed drives interest rates, how do economists explain rates dropping so precipitously in the last quarter of 2014 and the start of 2015 when the Fed was on the sidelines?  And, not only are the Fed sitting on the sidelines but it was in the fourth quarter of 2014 when the Fed ending the big monetary stimulus program that was the allegedly the cause of low interest rates.

The catalyst for rates is simply strong economic growth and inflation expectations.  Economic growth leads to pricing pressure or higher costs and greater loan demand.  Both, higher costs or inflation and increased demand for lending pushes interest rates higher.  Of course, one data point on the economy does make a trend.  The jobs report was a fairly significant report this time since the current and previous revisions were all quite strong.  Strong jobs

There are, however, opposing forces that are working to keep interest rates down.  The oil sector is slow and is putting downside pressure on economic growth, foreign economies are very slow which hurts international demand, and a strong dollar makes imports cheap and international sales that originate from the U.S. slow.  The strong dollar leads to cheap imports which will keep inflation in check, the strong dollar also makes our international sales less competitive which impedes the profits and production of big companies such as Caterpillar, GE, and other multinationals.

The recent increase may also be looked at as a small blip relative to the large reduction that has taken place recently.  The ten year Treasury did jump over 20 basis points this past week but is still below the yield seen at the start of the year.  Likewise, mortgage rates are up measurably on the week but have not passed the rates and costs of early January.

Bank rates market recap for February 9th, 2015:

CD interest rates:
Composite CD interest rate index 1.164 percent
3 month CD rates 0.426 percent
6 month CD rates 0.782 percent
1 year CD rates 1.150 percent
2 year CD rates 1.309 percent 
5 year CD rates 2.155 percent

Money market and savings account rates:
Bank money market rates and savings account rates 0.977 percent

Mortgage rates: 
30 year mortgage rates 3.8082 percent
15 year mortgage rates 3.176 percent
20 year mortgage rates 3.642 percent
30 year jumbo mortgage rates 3.875 percent
30 year FHA mortgage rates 3.675 percent

Credit card rates:
Credit card rates for new credit card offers 13.88 percent

US Treasury rates:
Six month Treasury rate 0.07 percent
One year Treasury rate 0.26 percent
Two year Treasury rate 0.65 percent
Five year Treasury rate 1.48 percent
Ten year Treasury rate 1.95 percent

All bank savings rates and lending rates are based on surveys conducted by at the close of February 6th, 2015 with all of the interest rates obtained directly from the banks within the survey.  Treasury rates are obtained directly from the Department of the Treasury.

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