Fed Officials Influence Rates

Dated: 08/19/2016

Views: 1025

Fed officials were the main influence on mortgage rates over the past week. Recent economic data has been mixed and has had little net impact. Mortgage rates ended the week just slightly higher.

On Tuesday, a speech from the Fed's William Dudley was unexpectedly hawkish. This caused mortgage rates to rise on fears that Wednesday’s minutes from the July 24 Fed meeting would indicate a higher-than-anticipated degree of support for a rate hike. Looser monetary policy has been good for mortgage rates, so Dudley’s comments were negative.
The minutes contained few surprises, however, and mortgage rates improved after their release. Investors viewed the minutes and recent comments from Fed officials as indicative of a desire to keep the Fed’s options open. It appears that a rate hike is possible as soon as the next meeting on September 21, but it is much less clear how likely. Investors will be looking for additional guidance about future Fed policy from Fed Chair Yellen’s speech on August 26.
One reason that the Fed has the leeway to maintain loose monetary policy is that inflation has shown few signs of rising. The most recent reading for the core consumer price index (CPI), a widely followed inflation indicator, showed that core inflation was 2.2% higher than a year ago. Core inflation excludes the volatile food and energy components, which provides a clearer indication of the underlying trend. In 2016, core CPI has held close to a 2.2% annual rate all year.

Source: MBS Quoteline

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David Sarnowski

David is a seasoned real estate professional, specializing in residential sales, rentals and investment properties. David is a 15 year resident of the New Jersey Gold Coast, with the local knowledge n....

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