Feds Raise Rates 3-15-2017

By James Brooks

This week?s FOMC meeting has adjourned with the Fed raising key short-term interest rates by a quarter point. This was move was expected by many market analysts. Even the revised economic projections failed to bring a significant surprise. There was a slight upward revision to this year?s inflation growth and the same for 2018?s GDP. With the exception to those minor changes, the other key projections remained unchanged from their previous estimates.

What is making waves is the indication that the Fed still only expects to make three rate increases this year and three next year. Some traders were expecting to hear that four or more increases would be made. That is being taken as a significant positive for the bond market and mortgage rates.

Overall, both stocks and bonds are reacting favorably to this afternoon?s events. The Dow is currently up 106 points while the Nasdaq is up 41 points. Bonds are making a more noticeable move from this morning?s levels. The bond market is currently up 28/32, dropping the 10-year Note yield from 2.58 this morning to 2.50% currently. This should cause widespread sizable downward revisions to mortgage rates. We should see an improvement in this afternoon?s mortgage pricing of approximately .375 - .500 of a discount from this morning?s rates.

February's Retail Sales data was posted at 8:30 AM ET this morning. The Commerce Department announced a 0.1% increase in retail-level sales last month, matching forecasts. A secondary reading that excludes more volatile and costly auto transactions showed a 0.2% rise when analysts were expecting to see a 0.1% increase. This means consumers spent slightly more in February than they did in January. However, because they didn?t vary much from expectations, we can consider the news neutral for mortgage rates.

The second release of the morning was February's Consumer Price Index (CPI), also at 8:30 AM ET. It revealed a 0.1% increase in the overall reading and a 0.2% rise in the core data that excludes food and energy prices. Both readings pegged forecasts, so we can also consider this data neutral for mortgage rates.

There are two minor pieces of economic data set for release at 8:30 AM ET tomorrow morning. February's Housing Starts is the first, tracking construction starts of new housing. It doesn't usually cause much movement in mortgage rates though. Tomorrow?s release is expected to show an increase in new home groundbreakings. Good news for the bond market and mortgage rates would be a sizable decline in new starts. But unless we see a large variance from forecasts the data likely will not lead to a noticeable move in mortgage pricing.

Also being posted early tomorrow is last week?s unemployment figures. They are expected to show 242,000 new claims for unemployment benefits were filed, down slightly from the previous week?s 243,000. Rising claims is a sign of a softening employment sector, so the larger the number of new filings, the better the news it is for bonds and mortgage rates.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.

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