Skip to content

Mortgage Market in Review – May 7, 2018

   

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates in check.  Personal income rose 0.3% and outlays rose 0.4%. Core PCE rose 0.2%. That data was near expectations. The 0.2% rise in core PCE, which excludes the volatile food and energy costs, took the index to a 2% yoy increase. The 2% mark is the Fed’s target for inflation and gives the governing body a data driven reason for a rate hike later this year.  The Institute for Supply Management (ISM) printed at 57.3, a small miss from the expected 58.5.  The ADP Employment Change report showed the economy added 204,000 jobs. Traders expected the addition of 225K jobs.  Unemployment was 3.9% versus the expected 4%.  Payrolls rose 164K versus the expected 190K.  We ended the week unchanged to better by 1/8 of a discount point.


LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
Consumer Credit Monday, May 7,
3:00 pm, et
$12B Low importance.  A significantly large increase may lead to lower mortgage interest rates.
Producer Price Index Wednesday, May 9,
8:30 am, et
Up 0.4%,
Core up 0.3%
Important.  An indication of inflationary pressures at the producer level.  Weaker figures may lead to lower rates.
Consumer Price Index Thursday, May 10,
8:30 am, et
Up 0.2%,
Core up 0.1%
Important.  A measure of inflation at the consumer level.  Weaker figures may lead to lower rates.
Weekly Jobless Claims Thursday, May 10,
8:30 am, et
215K Important. An indication of employment. Higher claims may result in lower rates.
U of Michigan Consumer Sentiment Friday, May 11,
10:00 am, et
98.5 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Fed Statement

Information received since the Federal Open Market Committee met in March indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Recent data suggest that growth of household spending moderated from its strong fourth-quarter pace, while business fixed investment continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

 

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong. Inflation on a 12-month basis is expected to run near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.

 

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

 

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

 


Copyright 2018. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied.