"THE NINE MOST TERRIFYING WORDS IN THE ENGLISH LANGUAGE ARE: `I'M FROM THE GOVERNMENT, AND I'M HERE TO HELP.`" Ronald Reagan.

It is rare that we have the Federal Reserve Board reporting on the economy and a State of the Union Address in the same week, let alone the same day. Yet, that is just what happened last week. First the Fed met and released a statement. The fact that they left rates where they were was no surprise as said that they will "stay the course" and keep rates low despite the fact that the economy is starting to recover. The Fed repeated its earlier forecast that conditions are "likely to warrant exceptionally low levels of the federal funds rate for an extended period." There is no indication that the recovery will be anything but moderate and fragile and increasing rates now could put this recovery in jeopardy. The Fed did say that they will let some stimulus measures expire, including halting their purchase of securities backed by home loans. Potentially, this could cause rates to increase on these loans if the markets can't absorb the supply.

The State of the Union Address also did not contain many surprises. The President's focus was jobs. The recovery can't sustain itself until it starts to produce jobs. While we were losing hundreds of thousands of jobs on a monthly basis 12 months ago and the losses are much lower now, the economy must start creating jobs. This is a tall order, especially considering the fact that we have already spent trillions trying to rescue the economy from oblivion. There are just not enough resources left to provide significant future stimulus. It is expected that future measures will be very specific and focused upon job creation, such as the proposed employee tax credit specifically for small businesses. If last year was a year of survival, this year will be the year of making sure we build a strong foundation to sustain a long-term economic recovery. The market's initial reaction to the government's statements were not positive when mixed in with other news, partially because they have heard this song before. One day later, the strong 4th quarter preliminary economic growth figures released did not reverse that negative trend. Look for the employment numbers due to be released at the end of this week as the next big statistical release.

Interest Rates �

The Markets. Rates were slightly lower in the past week. Freddie Mac announced that for the week ending January 28, 30-year fixed rates averaged 4.98%, down from 4.99% the week before. The average for 15-year fixed eased to 4.39%. A year ago 30-year fixed rates were at 5.10%. Rates held steady this week ahead of the Federal Reserve's (Fed) policy committee meetings, " said Frank Nothaft, Freddie Mac vice president and chief economist. The Fed announced on January 27th that economic activity has continued to strengthen. It also noted that with substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time." Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Forecast for the Week -

This will be a busy week for economic reports, starting off with the Personal Consumption Expenditures report on Monday. This report measures consumer price changes, and also gives us a look at inflation.

We'll also get a glimpse at Personal Income and Personal spending on Monday, as well as the Institute of Supply Managers Index, which is the king of all manufacturing indices, and is considered the single best snapshot of the factory sector.

By mid-week, the labor market will lead the big news. In addition to the latest Initial Jobless Claims numbers, ADP's Employment Report will also be delivered. These two data points will lead the way to Friday's official Jobs Report from the Labor Department. This report includes the latest information on job losses and the unemployment rate, as well as the average work week and hourly earnings. With all the recent talk about the job market, it will be important to get a current read on the situation.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Mortgage Bonds traded in a tight technical range last week between a ceiling of resistance at the 100-Day Moving Average and a floor of support at the 200-Day Moving Average - and as always, I'll be watching carefully to see which way Bonds and home loan rates are headed.