WEDNESDAY AFTERNOON UPDATE: This week’s FOMC meeting has adjourned with no change to key short-term interest rates, as was widely expected. The post-meeting statement verbiage was changed a little, but that was also not a surprise to the markets. The biggest change was removal of the word “patient” when addressing raising short-term rates. There was a general consensus that this was going to happen at this meeting though.
The Fed’s revised economic projections indicated they are expecting modest economic growth in the near future instead of the moderate rate they previously used. Downward revisions to benchmark economic indexes in their projections made many now feel that rate hike will come later in the year than previously thought. In fact, they stated that a rate hike at April’s FOMC meeting is not likely but there is a possibility that it will come at the meeting in June or sometime later.
Overall, this news has fueled rallies in the financial and mortgage markets. Stocks have strongly rebounded from early losses while bonds have greatly extended this morning’s gains. The Dow is currently up 219 points while the Nasdaq is now up 51 points. The bond market is currently up 34/32, falling below the 2.00% threshold again (1.92%). This should cause widespread afternoon improvements in mortgage rates of approximately .375 of a discount point from this morning’s pricing.
Tomorrow morning has two pieces of economic data scheduled for release, but neither are considered highly important. The first is last week’s unemployment figures at 8:30 AM ET tomorrow. It is expected to show that 293,000 new claims for unemployment benefits were filed last week, up from the previous week’s 289,000. Rising claims indicates a weakening employment sector, so the higher the number of claims the better the news it is for bonds and mortgage rates.
The Conference Board will post its Leading Economic Indicators (LEI) for February at 10:00 AM ET tomorrow morning. This index attempts to measure economic activity over the next three to six months. It is considered to be moderately important, but likely will not have a significant impact on mortgage rates. Current forecasts are calling for a 0.2% increase, meaning it is predicting that economic activity will likely expand modestly in the coming months. A smaller than forecasted rise, or better yet a decline would be considered good news for the bond market and mortgage rates. However, this data usually does not have a noticeable impact on mortgage rates, so unless we see a sizable variance from forecasts this report will probably have a minimal impact on tomorrow’s rates.