Uncertainty surrounding the Trump administration and “dovish” Fed minutes were positive for mortgage rates last week. While Stronger than expected economic data had the opposite effect. While it was a fairly volatile week, the net result of these influences was that mortgage rates ended the week with little change, remaining near the best levels of the year.
After several months of surprisingly weak reports on retail sales, the data released on Tuesday was encouraging. Retail sales in July surged 0.5% from June, which was well above the expected gains. In addition, the results for June were revised significantly higher. Since retail sales are a critical part of the economy, this month’s strong results were viewed as a positive sign for future economic growth, but also a contributor to rising inflation. This caused a negative reaction in mortgage rates.
It appears from the Fed minutes released on Wednesday that there is a growing split between Fed officials about when inflation will begin to rise. A growing number of officials would like to move slowly to raise the federal funds rate any further. They argued that the Fed “could afford to be patient under current circumstances.” The more dovish tone of the minutes was favorable for mortgage rates.
President Trump’s comments about the events in Charlottesville drew widespread condemnation. Apparent loss of support from political allies and business leaders and the rumored resignation of a key advisor sparked a stock market selloff late in the week. The chance that pro-growth legislation will pass any time soon is believed to have diminished. While this was bad for stocks, it was good for mortgage rates because expectations for future inflation also declined.
Looking ahead, investors will be watching for further developments regarding the Trump administration. It will be a light week for economic data. New Home Sales will be released on Wednesday and Existing Home Sales on Thursday. In addition, global central bankers will be attending the annual Jackson Hole conference Thursday through Saturday, and any comments about future monetary policy could affect mortgage rates.
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.
SVP, Regional Manager
THE CRAWFORD TEAM
V.I.P. Mortgage, Inc.