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Mortgage Rates React to Fed
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The statement released following Wednesday's Fed meeting was not good for mortgage rates. This week's economic data was roughly neutral. As a result, mortgage rates ended the week higher.
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Central banks around the world have had a heavy influence on mortgage rates recently. Last week, the increased willingness of the European Central Bank (ECB) to expand its bond buying program had a favorable effect, while China's policy changes had an offsetting effect. This week, it was the U.S. Fed. Even though many recent economic reports in the U.S. contained signs of a slowing economy, the Fed statement explicitly kept the door open for a federal funds rate hike at its December meeting. The hawkish tone surprised investors and caused an unfavorable reaction in mortgage rates.
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In the U.S., the first reading for third quarter GDP was 1.5%, down from 3.9% in the second quarter. The weakness in the third quarter was mostly due to changes in inventories, however, which are volatile from quarter to quarter. A decline in inventories offset 1.4% of growth during the third quarter, meaning that GDP would have increased nearly 3.0% if inventory levels had simply held steady.
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So far this year, GDP growth has averaged 2.0%. For the full year, the consensus is that GDP will grow a little above 2.0%, similar to the 2.4% growth seen in 2014.
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Next week, the important monthly Employment report will be released on Friday. As usual, this data on the number of jobs, the unemployment rate, and wage inflation will be the most highly anticipated economic data of the month. Before that, the ISM national manufacturing index and Construction Spending will be released on Monday. The ADP Employment Change and the ISM national services index will come out on Wednesday. With a possible rate hike in December, there might be a larger than usual reaction to incoming economic data.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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