Fed Leaders Move Markets

Dated: 10/26/2016

Views: 578

Over the past week, offsetting comments from top Fed officials caused some volatility for mortgage rates but little net change. Tame inflation data was favorable, however, and mortgage rates ended the week a little lower.

Late Friday afternoon, Fed Chair Yellen surprised investors with an idea for a new spin for U.S. monetary policy. Yellen said that Fed officials were researching whether a “high-pressure economy” may be the best way to realize and sustain improved levels of economic activity. Under this approach, the Fed would keep rates low longer than usual, and would do so without concern that inflation may rise above its 2% target level. Global long-term bond yields, including U.S. mortgage-backed securities, rose late Friday as investors saw a risk of higher inflation if the Fed became more focused on economic growth and less on controlling inflation.

Mortgage rates then reversed direction on Monday when Fed Vice Chair Fischer warned of the risks of keeping rates low for too long. Without specifically referring to Yellen’s comments, he suggested that low rates can lengthen recessions and can threaten the stability of financial markets. Since his statements contrasted with those of Yellen, they had the opposite effect on mortgage rates.

Tuesday’s release of the consumer price index (CPI)contained favorable news for mortgage rates. Core inflation in September came in below the consensus forecast at an annual rate of 2.2%. It has held steady close to this level all year.

Blog author image

David Sarnowski

David is a seasoned real estate professional, specializing in residential sales, rentals and investment properties. David is an 18 year resident of the New Jersey Gold Coast, with the local knowledge ....

Latest Blog Posts

What Shape Will The Economic Recovery Take

Earlier this year, many economists and market analysts were predicting an apocalyptic financial downturn that would potentially rattle the U.S. economy for years to come. They immediately started to

Read More

Homes Across The Country Are Selling Fast

• Buyers are actively searching for and purchasing homes at a record-breaking pace. According to the latest report from the National Association of Realtors (NAR), in July, 68% of homes were on

Read More

Real Estate Activity Strengthens As Economy Continues Phased Reopening

While much of the country was working on a phased reopening of the economy in June, real estate activity continued to strengthen as well. Nationally, June showing activity as tracked by ShowingTime

Read More

Real Estate Tops Gallup Survey Of Best Long Term Investment Again

Every year, Gallup conducts a survey of Americans to determine their choice for the best long-term investment. Respondents are asked to select real estate, stocks/mutual funds,

Read More