Data painted a dismal picture for the economy last week including tempering inflation readings, slowing job growth, depressed home sale data, and ever-higher gasoline prices. This gave markets hope that the Fed may start to ease up on the Fed Funds Rate.
But, while the stock market rallied on the news, the bond market continued its same blah performance that stretches back three weeks. Once again, mortgage rates were left relatively unchanged.
That all might end this Wednesday when the Federal Open Market Committee adjourns and releases its statement to the markets. Expect the Fed to hold the Fed Funds Rate at 5.250%, but as always, it’s not what the Fed does that matters as much as what the Fed says.
If the press release indicates that the Fed sees weakness in the economy, mortgage rates will fall. If the Fed indicates persistent strength in the economy, mortgage rates will rise.
In the Fed’s statement, expect to see verbiage about rising oil prices, stabilizing housing markets, and questions of the American consumer’s ability to sustain its spending habits.
Then, Friday morning, we’ll get our first look at how that question may be answered. The April Retail Sales report will be released at 8:30 A.M. ET and if it shows up weaker than expected, mortgage rates will fall.