When energy costs increase, there are two ways it can knock the economy out of equlibrium:
1. Businesses cut back on spending, creating a recessionary ripple effect
2. Business pass on higher costs to consumers, creating an inflationary ripple effect
But when energy costs increase rapidly, the ripples can make like a splash, sinking the mortgage market along with the entire economic ship and when the mortgage market fails, prices drop and rates go up.
In part from this week's rally to $135 per barrel, oil prices are now up 50 percent since February. It's one reason why mortgage rates spiked this week.
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