After spending the last few months preparing the market for the tapering of its Quantitative Easing program, the Federal Reserve decided that the economy is not quite ready for a reduction in Fed support. Mortgage rates reacted as expected and moved downward. The Fed left the door wide open to begin tapering when it believes that the economy is on solid enough footing to move forward with government support decreasing. In terms of economic data, the economy is still improving, albeit slowly, and still suffering from fits and starts. The Fed again pointed to the weakness in the labor market, and showed some signs of concern for the potential impact of increasing mortgage rates.
This week may start with rates trending downward after last week’s Fed meeting. However, rates could move either way during the course of the week, as the market continues to digest the Fed’s no change in policy, and continues to place odds on when the tapering will actually begin. If economic news remains muted, rates could continue trending slowly downward, at least, for the near term.
(Courtesy of Joe Massey, Castle & Cooke)