The last week since we were last here has been a little crazy! Here’s what’s happened. First, as you know, last week, the Fed had a meeting. On Wednesday, as expected, they announced that there was no change in the Fed Fund Rate, the interest rate they set. Then all heck broke loose with Fed Chair Powell said in his press conference that a “soft landing” for the economy is less likely and the Fed wants to see growth “below trend” before it will let up on rate hikes or even consider a rate improvement.
These comments were not well received by the markets; in fact, it surprised traders, and the 10-year note, which largely affects the trend of mortgage rates, spiked to its highest level since 2007. Mortgage rates rose to their highest levels of the year, and some see this trend toward volatility continuing for now.
What I’m watching this week…
There’s lots of important economic reporting set to release this week that could support the Fed’s stance on additional rate hikes. The analysts will be watching closely for sure. Among the most highly anticipated are the latest GDP (gross domestic product) numbers as well as the Fed’s favorite inflation indicator – the PCE Index.
As for the GDP, The third estimate of second-quarter GDP, at a 2.3 percent consensus, is expected to show even more growth than 2.1 percent in the second estimate.
Inflation readings for August are expected at monthly increases of 0.5 percent overall but only 0.2 percent for the core (versus July’s increases of 0.2 percent for both). Annual rates are expected at 3.5 percent overall and 3.9 percent for the core (versus July’s 3.3 and 4.2 percent). Any surprises with inflation could cause further upward movement for mortgage rates.
There’s also some important housing data coming out this week, starting with the Case-Shiller report on Home Prices. Forecasters expected to see the adjusted 20-city monthly rate rising 0.7 percent in July versus June’s 0.9 percent increase, and the actuals came in as predicted. Year-over-year, the number was anticipated to be down 0.6 percent but came in showing an increase of 0.1 percent.
New home sales rose from 697,000 in June to a 714,000 annual rate in July, with forecasters calling for modest slowing in August back to a 699,000 rate. The latest numbers for pending home sales are also expected to come out on Thursday. Analysts watch this report as a leading indicator of how home sales numbers are shaping up in the coming months.
I’ll be keeping an eye on all of it for you and will report back next time. Until then, have a great week!
