Fed Officials Revise Projections

Mortgage rates ended the week near the best levels of the year. Wednesday’s favorable Fed statement and continued concerns about the British vote on June 23 on leaving the European Union were the main factors. The economic data released over the past week had little influence on mortgage rates.

There were few surprises in the Fed statement or Fed Chair Yellen’s press conference. Of note, the projections from Fed officials for the path of rate hikes in coming years showed a significantly slower pace than the last set of projections made three months ago. At the last meeting in April, only one out of the 10 voting Fed officials expected to end the year with just one rate hike. Now six expect this to occur. Little new information was provided about the timing of the next rate hike. In the press conference, Yellen acknowledged that the upcoming vote in Britain was a consideration. The dovish tone of the statement was positive for mortgage rates.

After several months of weakness, Tuesday’s report on retail sales reported a third straight month of solid gains. Following an enormous gain of 1.3% in April, retail sales increased another 0.5% in May from April. Consumer spending increased at a disappointing 1.9% annual rate during the first quarter of 2016. Economists now estimate that consumer spending is increasing at a much stronger 3% to 4% annual rate during the second quarter, partly due to confidence in the labor market and low fuel prices.

- See more at: www.GrahamPeterson.com