Chairman of the Federal Reserve System (Fed) Jerome Powell was the center of focus this past week as financial players awaited upcoming Fed policy recommendations.
However, he has not presented anything new regarding policy adjustment timeframes, leading to Naples mortgage and other mortgage rates slightly climbing at the end of the week.
To help sustain the economy, the Fed began purchasing $120 billion in Treasuries and mortgage-backed securities (MBS) monthly near the pandemic onset. As the economy has improved, Fed officials have stated that extra stimulus is no longer necessary.
Now, investors are anticipating a reduction in these bond purchases before year-end. Given the high level of inflation, many officials have recently expressed support for the tapering to begin as soon as possible.
However, in a highly anticipated speech on Friday, Fed Chair Powell stressed the “near-term risk” that the spread of Covid poses to the economy. He also reiterated the reasons why the recent jump in inflation could be transient owing to pandemic-related temporary variables.
Before eliminating stimulus, he stated that he would like to see further lowering the unemployment rate. In summary, there is still a lot of disagreement among officials about when to taper, and investors didn’t get the specific direction they were seeking.
The Fed’s preferred inflation gauge is the core PCE price index. Core PCE was 3.6 percent higher in July than a year ago, which was in line with expectations. It was the same annual rate of gain as the previous month, but it was the most significant yearly pace since 1991, up from just 1.5 percent in February.
While analysts have predicted readings of this magnitude during the economy’s reopening, they disagree on whether more significant inflation will be a one-time event or a long-term trend.
Existing-home sales increased by two percent in July over June and were marginally higher than a year earlier. At this time last year, inventory levels were down 12 percent from the previous year, with only a 2.6-month supply nationwide.
That was significantly below the 6-month supply that is considered a healthy balance between buyers and sellers. The median price of an existing home was $359,900, up 18 percent from a year ago.
Investors will be keeping a careful eye on Covid case counts around the world in the coming months. Mortgagor’s such as Naples mortgage will also be looking for signals from Fed officials about when they’ll change monetary policy.
Aside from that, the critical Employment report release is this Friday, and the numbers on job creation, unemployment rate, and pay inflation will be the most closely watched economic statistics of the month.
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