“Now did you read the news today? They say that danger’s gone away.” (Genesis) Our Federal Reserve has a dual mandate: to maintain price stability (inflation) and maximize employment. They also have a 3rd “unstated” mandate, which is to maintain market calm. This past week, the Fed came up a bit short on that “unstated” mandate and created quite a bit of confusion and market turmoil midweek upon releasing the minutes from the Sept 26th Fed meeting.

In that meeting we learned there is a group of “hawkish” Fed Members that want to hike the Fed Funds Rate more aggressively into 2019. At the same time, there were other Fed members who think the current Fed Funds Rates is “about right” — meaning no more hikes for now. The Fed talking out of both sides of their mouth was a source of confusion for the markets and home loan rates.

Adding to the confusion is the Fed’s very own inflation forecast which suggests inflation will remain close to current levels through 2021. If we recall the Fed mandate to maintain price stability, one could argue there is no need to raise the Fed Funds Rate if inflation is not rising.

Food for thought: If the Fed’s modest inflation forecast comes to pass, we will likely see home loan rates remain near historically attractive levels.

This coming week may be another exciting and potentially volatile one as the Fed will see one of the more important economic reports of the month — Friday’s first read on 2018 third quarter Gross Domestic Product (GDP). The second quarter saw a sharp 4.2% rise as the U.S. economy continues to strengthen with the labor market near full employment. Expectations are for a slightly slower growth rate, near 3.2% — but still quite strong.

GDP is the value of the goods and services produced in the United States. The growth rate of GDP is the most popular indicator of the nation’s overall economic health.

Housing data will also be reported as the sector cools a bit and inventories rise from anemic levels seen in the past few years.

Key economic reports this week:

  • The economic calendar begins on Wednesday with New Home Sales, followed by Pending Home Sales on Thursday.
  • Durable Orders will be released on Thursday along with Weekly Initial Jobless Claims.
  • The big report this week will be Friday’s first reading of third quarter Gross Domestic Product.

If you or someone you know has any questions about home loan rates, please give me a call. I’d be happy to help.

Related Articles

This past week, home loan rates ticked up again despite the Fed recently cutting rates by a full point and the 10-year Note remaining just above 1%. Why? Mortgage backed securities (MBS) are bonds that price home loan rates. This week, the spread or difference in yield between the 10-year…
Read More of the post Coronavirus and Extreme Volatility

The continued strength of the labor market, along with historically low mortgage rates, will keep positive housing momentum alive in 2020. The Unemployment Rate is currently at a 50-year low of 3.6% with expectations for the index to push even lower to 3.25% by year's end, matching lows last seen…
Read More of the post A Great 2020 Housing Story

Home loan rates continue to hover near three-year lows. There are some on Wall Street who say rates are going to push even lower at some point — and they may be right. But what if they're wrong? What if rates have bottomed for the foreseeable future? Yes, locking a…
Read More of the post What the Market Is Saying

Bonds love uncertainty and bad news. As a result, rates improve when not-so-good news emerges. That was the story this past week, as China has reported a new deadly coronavirus has started to spread in their country. The virus, which spreads through human contact, has taken several lives and has…
Read More of the post Uncertainty Helps Rates

We recognize this is a difficult time for many people. Click here or call 866-913-2951 for more information and to learn about current options available to our borrowers.