Interest Rates Seen Rising

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Interest rates are expected to keep rising for the rest of the year over worries that higher energy prices and a tighter labor market could fuel inflation, Freddie Mac said in its monthly economic outlook.

"Uncertainty in energy markets and other events will no doubt cause significant volatility in the numbers for some time to come and may lead to a change in both expectations about inflation and its realization," the secondary mortgage market giant said.

The prediction comes as the Federal Reserve was expected to raise the benchmark federal funds rate by a quarter percentage point to 5% at its meeting last week.

In its latest weekly survey, Freddie Mac said 30-year mortgages averaged 6.59%, the highest since June 2002. Freddie Mac said it forecast consumer prices would climb in the second quarter at an annualized rate of 4% before moderating to an annualized gain of 2.5%, barring increases in oil prices.

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