Mortgage rates saw moderate volatility throughout the short week, while steeply improving early in the week after a second healthcare worker in Dallas tested positive for Ebola, alongside of a dovish-Fed tone for monetary policy and deteriorating outlooks for both domestic and overseas growth.
Fed Vice Chair, Stanley Fischer, stated prior to the start of the week that efforts to normalize the U.S. monetary policy after years of extraordinary stimulus may be hampered by the global growth outlook. San Francisco Fed President, John Williams, warned early in the week that he would consider further asset purchases if inflation worsens. St. Louis Fed’s, James Bullard, added later in the week that the Fed should consider delaying the end of its bond-buying stimulus in order to manage inflation expectations. While Minneapolis Fed’s, Narayana Kocherlakota, reiterated his view late in the week that rate increases any time in 2015 would be inappropriate, Fed expectations to increase rates have drifted to late 2015.
Despite the dovish tone instilled by the Fed throughout the week, Philadelphia Fed President, Charles Plosser, urged for rates to be raised very soon, as he believes that Fed policy does not reflect the significant progress that has been made in labor markets. Plosser reiterated his belief that raising rates too late may force increases to be too rapid and disruptive, which could threaten financial stability.
While President Obama stated mid-week that the CDC (Centers for Disease Control) should send a response team for any new U.S. Ebola case within 24 hours of the diagnosis, warning that the outbreak may spread globally if not properly contained, top health officials later claimed that there will not be a large-scale outbreak unless the virus mutates.
While violent protests for peace and stability broke out in the Ukraine early in the week, Russian president, Vladimir Putin, and Ukrainian president, Petro Poroshenko, planned to meet Friday in order to discuss plans for peace in Ukraine and gas supplies to Europe. Fighting also continued in Iraq throughout the week between ISIS (Islamic State of Iraq & Syria) and coalition forces, while defense chiefs of 22 nations planned to meet in order to discuss the current military plans against ISIS going forward.
The U.S. economic growth outlook dipped Wednesday morning, after Retail Sales, PPI (Producer Price Index), Empire Manufacturing all missed their expectations, alongside of a growing concern for European growth. The outlook recovered somewhat after Industrial Production, the Philadelphia Fed index, and Housing Starts all beat their estimates later in the week. Last week’s Initial Jobless Claims of 264,000 shattered their 290,000 estimate, representing their lowest level since April 2000. Consumer confidence also beat their expectations late in the week, after the U.S. labor market continued to show sustained signs of improvement. The FOMC (Federal Open Markets Committee) will meet for their next rate and policy decision on Wednesday, Oct 28th.
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By: Michael Borodinsky
Vice President/Regional Builder Branch Manager | Caliber Home Loans
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