Will They Or Won't They?
The initial reaction with regard to the slightly disappointing August jobs numbers, was speculation that a rate hike was less likely to result from the meeting of the Federal Reserve Board’s Open Market Committee next week. Keep in mind that many are speculating that the Fed will be reticent to take any actions at the following meeting, which takes place a few days before the Presidential election. The Fed is not likely to admit that the date of an election would be reason to hold off on taking necessary fiscal action, but logic tells us that the Fed will not want to be perceived as having any influence in the political process, speculative or not.
If we are correct in this assumption, the Fed might look long and hard at their meeting next week, if indeed their next chance to raise rates will be in December. And if that happens, that will mean the Fed will have raised rates two Decembers in a row. Certainly, this schedule would fit the definition of “gradual” rate increases, which we have been hearing about for quite some time.
Though we can’t predict what will happen next week, let alone at the next two meetings, we can say that a lot can happen between now and December, including some sort of shock which influences the economy. Shocks can take the form of natural disasters, political upheaval, terrorist activity or more. And history tells us that shocks typically affect the economy negatively. Thus, if the Fed does not move next week, they will need to see continued improvement in the economy and no major shocks which provide risks to the downside.
The Weekly Market Update
Rates continued to hold steady near record lows in the past week, staying in the same range for almost three months. For the week ending September 1, Freddie Mac announced that 30-year fixed rates were at 3.44%, moving slightly down from 3.46% the week before. The average for 15-year loans fell one tick to 2.76% and the average for five-year adjustables decreased to 2.81%. A year ago, 30-year fixed rates were at 3.90%, almost one-half of one percent higher than today's levels.
Attributed to Sean Becketti, Chief Economist, Freddie Mac --"The rate on 30-year fixed home loans fell 2 basis points to 3.44 percent this week. As rates continue to range between 3.41 and 3.48 percent, many are taking advantage of the historically low rates by refinancing. Since the Brexit vote, the refinance share of residential finance activity has remained above 60 percent."
Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.