By James Brooks

The bond market is down 12/32 (2.27%), which should push Today's mortgage rates higher by approximately .250 of a discount point.

November's Consumer Price Index (CPI) was today's only relevant economic data. The 8:30 AM ET release showed no surprises with no change in the overall reading and a 0.2% rise in the core data. Both readings pegged forecasts, indicating that inflationary pressures at the consumer level of the economy remain subdued. This is somewhat good news for the bond market and mortgage rates, but not good enough to overcome the recent negative momentum in bonds.

Tomorrow morning has two pieces of economic data. The first up is November's Housing Starts at 8:30 AM ET. This data isn't known to be highly influential on bonds or mortgage pricing, but it does give us an indication of housing sector strength by tracking new home groundbreakings. Analysts are expecting to see an increase in new starts, indicating strength in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates tomorrow morning.

The second report of the day will be November's Industrial Production report at 9:15 AM ET. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.1% decline in output, indicating manufacturing softness. A larger than expected decline would be good news for bonds, while a stronger reading would show manufacturing strength and be considered bad news for rates.

However, the major events of the day come during afternoon hours tomorrow. This week's two-day FOMC meeting that begins today will adjourn at 2:00 PM ET tomorrow. This is when the markets are expecting Fed Chair Janet Yellen and friends to make the Fed's first hike to key short-term interest rates since 2006. At the same time their post-meeting statement is made, they will also release revised economic projections. That will be followed by a press conference with Chair Yellen at 2:30 PM ET. All three of these FOMC events that can be highly influential on the financial and mortgage markets.

I am one of those many that expect a .25% hike in key short-term rates tomorrow afternoon, although there is still a small chance that the Fed will wait for the next meeting to make a move in my opinion. The markets certainly have a .25% bump built in right now, so what can we expect after the announcement? Let's tackle the easy one first. That would be the Fed not making a move yet. I am fairly certain that the bond market would rally and we would see a sizable improvement in mortgage rates. The more complicated scenario is if the Fed does announce a .25% rate increase. If this is what happens, I believe that there is a good chance of seeing an initial negative knee-jerk reaction in bonds that would push rates higher. However, shortly after we may see a reversal that would lead to rates starting a downward trend. This is obviously all speculation at this point. I am leaning towards the Fed making the rate hike this week and am expecting an interesting couple of days once the meeting adjourns.

There is a high probability of seeing a good amount of volatility in the markets and mortgage pricing tomorrow. Therefore, please proceed carefully of still floating an interest rate and closing in the near future.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.