The Federal Open Market Committee released the results of their monthly meeting on Wednesday. As they are waiting for job growth to pick up, a rate hike has not yet been issued. Their statement says that slack in the jobs market is diminishing, but further improvement is needed. The Fed’s economic forecasts placed the unemployment tendency up to 5.2% – 5.3% from 5.0% – 5.2%, and the GDP tendency down to 1.8% – 2.0% from 2.3% – 2.7%. The released statement says that economic growth is “expanding moderately,” and the labor market is “picking up.” The consumer sector is described as “moderate” with improvements in housing, business investment and exports continue to be “soft.” The inflation assessment remains unchanged; inflation is “running below target” but expectations are “stable.”
Jobless claims have dropped back down to near historic lows. Initial claims in the June 13 week fell 12,000 to 267,000, with the 4-week average dropping 2,000 to 276,750.
Just about all the readings in the May consumer price report point to very soft price pressures with the overall monthly gain, at plus 0.4%, and the ex-food ex-gasoline core gain, at only plus 0.1%. The 0.4% overall gain may look a bit high compared with prior months including April’s 0.1% rise, but it reflects an unsurprising jump in energy costs specifically gasoline which jumped 10.4% in the month. But energy prices are still very low, confirmed by the year-over-year rates which for all energy products are down 16.3% and for gasoline, down 25.0%!
Housing starts came in at 1.036 million for the month of May, down 11.1% from the April rate. However, April has been revised higher to 1.165 million for a 22.1% gain from March. Permits went up by 11.8% to 1.275 million in May, following a 9.8% gain in April. This is the best rate for permits since August 2007.
This week will bring more housing market reports, including updates on house prices, and new and existing home sales.
Rates for most loan programs have recently retreated slightly from 2015 highs. The largest decrease was displayed by the 30-year FHA, down 12.7 basis points from the previous week to a rate of 3.500% (5.062% APR). The only programs that did not decrease are the 30-year Jumbo, which increased by 11 basis points, and the 15-year fixed, which remained unchanged from the prior week. According to Freddie Mac deputy chief economist, Len Kiefer, this slight drop in mortgage rates is likely due to the recent positives within the housing market.
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