Weekly Economic Update – 7.18.17

Over the past week, comments from Fed officials and weaker than expected economic data were positive for mortgage rates. After rising for the last two weeks, mortgage rates ended last week slightly lower.

Every six months, the head of the U.S. Fed testifies before Congress. In her testimony on Wednesday, nearly all of Fed Chair Janet Yellen’s comments simply reiterated what had already been communicated by Fed officials. However, she did provide one new piece of information regarding future Fed policy which caused a significant reaction. Yellen said that the Fed would not have to raise the federal funds rate “all that much further” to reach a “neutral policy stance,” which is the rate which neither helps nor hinders economic growth. The practical implication of a lower “neutral” rate is that the Fed would stop raising rates sooner than investors had previously expected. A potentially smaller number of future rate hikes was viewed as good news for mortgage rates.

A shortfall in the retail sales and inflation data released on Friday also was positive for mortgage rates. This was the first period of back-to-back monthly declines since July and August of last year. The inflation data also fell short of expectations. The core consumer price index (CPI) remained well below the Fed’s target level of 2.0%. Expectations for another rate hike by the Fed this year declined after the release of the retail sales and inflation data.

Looking ahead this week, the biggest event for U.S. markets is likely will the European Central Bank (ECB) meeting on Thursday. While ECB officials have already said that they will wait for the meeting on September 7th to announce their plans for the bond purchase program, any guidance at this meeting about future policy will affect markets around the world. It will be a light week for U.S. economic data.

Please let me know if you have any questions in regards to this, or if there is anything we can do for you and your valued clients.

Thank you for your continued support, have a productive week.

Stuart Crawford
SVP, Regional Manager
V.I.P. Mortgage, Inc.

AZ: LO0911271
NM: 156166

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