New Economic Update Weaker than expected economic data was favorable for mortgage rates last week. A surprise announcement from the Swiss National Bank caused a lot of volatility, but had only a small net effect. Mortgage rates again ended the week a little lower. The biggest economic reports released contained mostly positive news for mortgage rates. December Retail Sales posted a much larger than expected decline. This report is volatile month to month (although, this report is typically volatile month to month). Looking at the entire fourth quarter, Retail Sales posted solid gains. The inflation data also supported lower mortgage rates. Core CPI inflation, which excludes food and energy, was just 1.6% higher than one year ago, back to the lowest level of the year, and well below the Feds target level of 2.0%. Due to the decline in oil prices, overall CPI inflation was just 0.8% higher than one year ago, the lowest annual rate in over five years. Increased expectations for sovereign bond purchases by the European Central Bank (ECB) also helped mortgage rates improve last week. Continued low readings for both economic growth and inflation data in Europe suggest a need for additional stimulus. In addition, a court ruling in Germany cleared a path for the ECB to initiate a bond purchase program. On Thursday, the Swiss National Bank caught investors off guard with a major change in monetary policy (Switzerland is not in the European Union). While the Swiss National Bank has no inside knowledge about ECB policy, this move was made to prepare Swiss markets for expected sovereign bond purchases by the ECB. This week, investors will be focused on the European Central Bank meeting on Thursday. The big question is whether the ECB will announce a sovereign bond purchase program. This will be closely followed by Greek elections on January 25th which may indicate the level of support for Greece to leave the European Union. Domestically, we have Housing Starts figures released on Wednesday, and Existing Home Sales on Friday. Please let us know if you have any questions or if there is anything we can do to assist you and/or your family and friends this week.
Posted on: Tue, 20 Jan 2015 00:02:54 +0000
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