Market Forecast: Federal Open Market Committee Meets Tuesday and Wednesday
The Federal Open Market Committee (FOMC) will meet this Tuesday and Wednesday and vote on whether or not to raise the benchmark interest rate. Last week, the European Central Bank voted to leave interest rates unchanged. In the United States, Mortgage rates were on the rise last week as the market priced in a federal interest rate hike.
The FOMC will meet for the second time in 2017 and is largely expected to raise interest rates. Last week’s exceptional jobs report, positive consumer sentiment, and remarks by several FOMC members are supportive of a rate hike.
After hitting an 11-year high in December, the home builders’ confidence index has declined slightly. It has remained above the 50-point neutral level. The index measures confidence across several components including present sales, expected sales, and buyer foot traffic. Home builders are optimistic about the new administration’s plans to reduce regulation and stimulate economic growth.
Housing starts and building permits are the best indicator of the new home sales reports. Last month, housing starts and building permits stalled, with housing starts dropping slightly and building permits up slightly. Permits and starts generate a ripple effect on the housing market, stimulating lending and later spending on furnishings for the newly constructed homes.
With the unemployment rate at 4.8% and the ADP employment report adding a robust 298,000, the labor market is supportive of an FOMC rate hike. Fed Chair Yellen commented on the strength of recent job reports. The FOMC projected three rate hikes for 2017.
Sources: CNBC, Fox Business, MarketWatch, Bloomberg, Mortgage News Daily