There were no significant surprises in the major economic data or in the news from the Fed this week, and mortgage rates ended with little change.

The minutes from the December 19 Fed meeting released on Wednesday were consistent with recent comments from Fed officials in supporting the notion that they are open to slowing the pace of monetary policy tightening based on future economic conditions. According to the minutes, the "extent and timing of further policy firming" is "less clear" due to recent financial market volatility and signs of slowing economic growth. This message eased investor concerns that the Fed might mistakenly tighten too quickly.

Regarding the Fed's reduction in its roughly $4 trillion in holdings of Treasuries and mortgage-backed securities, Fed Chair Powell on Thursday said that the final size of the balance sheet will be "substantially smaller than it is now," but he declined to provide a less ambiguous figure. He elaborated that a "more normal level" would be no larger than the size needed to conduct monetary policy. Investors will be looking for more precise guidance in the future.

Looking ahead, Retail Sales will be released on Wednesday. Since consumer spending accounts for about 70% of all economic activity in the U.S., the retail sales data is a key indicator of growth. Housing Starts will come out on Thursday. Industrial Production, another important indicator of economic activity, will be released on Friday.

Also note that the government shutdown which began on December 22 has caused delays in the release of some economic reports produced by government agencies and likely will continue to do so as long as it is in effect. It is generally not known in advance when the impacted data will be ready to be released. 

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