Mortgage rates fell this week, according to the Bankrate.com national survey of  large institutions.

The 30-year fixed rate fell 7 basis points to 6.89 percent and the 15-year fixed rate dropped 8 basis points to 6.51 percent. The one-year adjustable rate fell 2 basis points to 5.81 percent. A basis point is one one-hundredth of a percent.

Most mortgage hunters know rising inflation spells trouble for all things loan. But what exactly do economists, lenders, Wall Street traders and other numbers types mean when they refer to the "inflation rate?" And where should borrowers look to get an idea of where that rate is headed?

According to First Union Corp.'s David Orr, the answer lies with the CPI. The acronym stands for Consumer Price Index -- the broadest government measure of how much goods and services cost in the U.S.

"It's very thorough and it's very systematic," says the Charlotte, N.C.-based bank's chief economist. "When you say inflation rate, that's the CPI."

The Department of Labor's Bureau of Labor Statistics has CPI data going back for decades. Government employees survey landlords, shopkeepers, grocers and the like each month to find out what consumers are paying at the retail level. They tally the results and produce a weighted index based on estimates of how much of a person's income goes toward various products. Since most people spend more on shelter expenses such as heating oil and mortgage payments than clothing, for example, an increase in housing costs would affect the overall CPI more than a spike in boatneck T-shirt prices.

Based on what the index shows, mortgage-backed security traders, lenders and other financial professionals make judgments about whether inflation is a serious threat. If the CPI shows prices increasing at a relatively slow pace, bond yields and mortgage rates tend to come down.

The most recent report, released April 13, catalogued an increase of just 1.7 percent for the 12-month period ended in March. That compares with increases in the 2.5 percent to 3.5 percent range in the mid-1990s. Partly because of those results, mortgage rates have fallen to the low levels they're at today.

"The movement of the inflation rate and the mortgage rate is essentially tit for tat," Orr says. "Both of those things benefited largely by the collapse of the economies in Asia."

With those economies potentially on the mend and the cost of petroleum products rising from recent lows during the past several weeks, experts say we may be in for a couple months of rate stagnation followed by a creep upward as the inflation rate climbs. In the meantime, economists will continue to watch the CPI to see if such prognastications pan out.

"In my estimation, we're at the end of that period of extraordinary good luck," Orr says. "It doesn't mean inflation is going to go up dramatically or mortgage rates are going to go up dramatically, but it's going to mean they'll stop going down."

He sees 30-year fixed rates not too far above 7 percent by year end.

The average monthly principal and interest on a $100,000, 30-year fixed-rate mortgage fell to $658 and the payment on a 15-year loan dropped to $872.

The Bankrate.com National Index is based on a Wednesday survey of the 50 largest banks and the 50 largest thrifts in the 10 largest metropolitan areas in the country. These are averages. To find specific rates offered by lenders, go to our mortgage rate search engine.