Last week, mortgage rates finished very close to where they started. This was after rates worsened mid-week due to Fed Chair Yellen’s Congressional testimony, inflation data and a drop in equity markets that helped support lower rates heading into the long weekend. Yellen noted in her testimony that it would be “unwise” to hold off too long on raising rates. With the economy closing in on maximum employment and inflation nearing the Fed’s 2% target, there was nothing in the testimony to indicate that the Fed was moving away from the position of 3 rate hikes in 2017.
The week ahead will have very little in economic data for markets to digest, leaving tomorrow’s release of the Fed minutes from the February 1st meeting the main event for the week. The 3 rate increase is still widely believed to the be the Fed’s view for 2017, with Fed Funds futures currently trading at a 27% probability that rates will be 75 basis points higher by the end of the year. The minutes could reveal the Fed’s thinking on potential policy changes with the new administration, such as tax policy and fiscal stimulus, and the effects those polices could have on inflation and on employment. With current levels of employment and inflation nearing the Fed’s targets, it is almost a forgone conclusion that the Fed will increase rates again soon. The only question is which meeting and how many times this year.
Economic Calendar for the week of 02/13/2017 to 02/17/2017:
Monday: Markets Closed: U.S. Presidents Day
Tuesday: Markit PMI
Wednesday: MBA Mortgage Applications, Existing Home Sales, FOMC Meeting Minutes
Thursday: Initial Jobless Claims, Continuing Claims, FHFA Housing Price Index
New Home Sales, U of M Consumer Sentiment