COFI Moves Up

The upward movement in the Eleventh Federal Home Loan District Cost of Funds Index for August covers a period that ended before the Federal Reserve Board lowered the target federal funds rate by 50 basis points on Sept. 18.And where the Fed action might have an impact, on the cost of funding mortgage originations by thrift members of the Federal Home Loan Bank of San Francisco, that impact might not be reflected for several months. COFI rose over 8 basis points in August, to 4.359%. The increase ended two consecutive months of decline in the index. COFI is a lagging indicator because of the way it is compiled. It is a weighted average that takes into account what it cost thrifts in California, Arizona, and Nevada to fund mortgages over a period of several months. These sources include deposits and borrowings.