What’s Ahead for the Week of July 14, 2014
Last week we heard speeches from two Federal Reserve Bank Presidents and read the Federal Open Market Committee minutes (FOMC).
Minneapolis Fed Bank President Narayana Kocherlakota’s speech calmed concerns over inflation. Mr. Kocherlakota said that the Fed expects inflation to remain below its target rate of two percent for several more years. He tied low inflation to the unemployment rate and said that the nation’s workforce is not fully utilized in times of low inflation. He further cautioned that June’s national unemployment rate of 6.10 percent “could well overstate the degree of improvement of the U.S. labor market.” Stanley Fischer, the Fed’s new vice-chairman, spoke before the National Bureau of Economic Research on Thursday. Mr. Fischer addressed the issue of breaking up the nation’s largest banks to eliminate the government’s exposure to “Too Big to Fail”, but pointed out that it wasn’t clear that breaking up the largest banks would end federal bailouts of banks considered too big to fail. He said that breaking up the biggest banks would be “a complex task with an uncertain payoff.” Mr. Fischer further said that any efforts to prevent a housing bubble we should focus on the supply side and cautioned that “measures aimed at reducing the demand for housing are likely to be politically sensitive.”
The minutes of the Fed’s last FOMC meeting indicate that the Fed plans to continue bond purchases at the rate of $10 billion per month with a final purchase of $15 billion of Mortgage Backed Securities and Treasury Bills in October. FOMC members re-asserted their stated position that the Fed’s target interest rate of 0.00 to 0.25 percent will not change for a considerable time after the bond purchase program ends.
May Job Openings reached their highest level since June 2007 and quits and layoffs fell from April’s reading of 4.55 million to 4.50 million. Weekly Jobless Claims fell to 304,000 against expectations of 320,000 claims and the prior week’s reading of 315,000 claims.
Average mortgage rates rose last week based on the positive economic news last week. The average rate for a 30-year fixed rate mortgage increased by three basis points to 4.15 percent with discount points at 0.70 percent. The average rate for a 15-year fixed rate mortgage rose by two basis points to 3.24 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage rose by one basis point to 2.99 percent with discount points unchanged at 0.40 percent.
What’s Ahead for the Week?
Scheduled economic news affecting housing includes Retail Sales with and without the auto sector, Fed Chair Janet Yellen’s testimony, Fed’s Beige Book Report, NAHB Home Builders Market Index, Housing Starts and Consumer Sentiment.