Fed Debates Next Move
The mortgage market was a bit jumpy last week in response to the mixed Fed messages that began on Tuesday with an unexpectedly “pro rate hike” speech from the Fed’s Dudley. He suggested that Fed rate hikes may come sooner than investors expect. Conversely, Thursday’s comments from the Fed’s Bullard were very dovish. He said that one federal funds rate hike is all that will be needed for the “foreseeable future.” Investors concluded that there is no immediate consensus at the Fed regarding rate hikes, and as a result, there was little net change in either the outlook for future Fed policy or in mortgage rates.
The Fed watches closely the core consumer price index (CPI) for signs of stoking inflation. The most recent CPI showed that core inflation was 2.2% higher than a year ago.. Many investors prefer to look at core inflation because it provides a clearer indication of the underlying trend. In 2016, core CPI has held close to the current level all year, which isn’t yet ringing the Fed’s alarm bells.
Factors: New home sales will come out on Tuesday and the report on existing home sales on Wednesday. Durable orders, an important indicator of economic activity, will be released on Thursday. The second estimate of second quarter GDP, the broadest measure of economic activity, will come out on Friday. In addition, Fed Chair Yellen will be speaking at Jackson Hole on Friday. Investors will be looking for additional guidance about future Fed policy.
For specific rates, please contact your Tradition Mortgage loan officer.