Inflation Rate Stays Flat in June
Inflation was flat in June, but achieved a 0.00 percent reading as compared to May’s – 0.10 percent reading. Analysts expected a June reading of +0.10 percent reading month-to-month. The Federal Open Market Committee of the Federal Reserve has established a benchmark reading of 2.00 percent inflation year-over-year as an indication of economic recovery. In recent months, the Fed has increased its target federal funds rate at each meeting of the FOMC. A slowdown in inflation and other economic indicators may cause the Fed to halt rate increases until conditions improve.
Fed Chair Testifies before House Financial Services Panel
During testimony last week, Fed Chair Janet Yellen addressed questions about Federal Reserve board members’ interaction with Wall Street. Ms. Yellen explained that the Fed values clear communications with Wall Street as a productive relationship. Chair Yellen also noted that the Fed may taper off on interest rate increases soon; she said that further rate increases may not be warranted at present.
Stating that “monetary policy is not a preset course,” Chair Yellen said that the Fed is aware of problems associated with forecasting higher than actual inflation gains, but also said that the Fed believes that inflation will achieve the 2.00 percent annual goal established by the Fed.
Ms. Yellen hinted that her tenure as Fed Chair may be reaching its conclusion; she did not answer media inquiries about whether she would stay on if asked. She said she was concentrating on current issues instead of focusing on potential developments.
Mortgage Rates Rise, New Jobless Claims Lower
Mortgage rates rose again last week; the average rate for a 30-year fixed rate mortgage exceeded four percent for the first time since May with an average rate of 4.03 percent. Fifteen-year fixed rate mortgages had an average rate of 3.29 percent. Average mortgage rates for 15 and 30-year fixed rate mortgages rose seven basis points over last week’s average rates. The average rate for a 5/1 adjustable rate also rose seven basis points to 3.28 percent. Discount points averaged 0.50 percent for all three mortgage types.
247,000 new jobless claims were filed last week as compared to expectations of 245,000 new claims filed and last week’s reading of 250,000 new claims. First-time jobless claims stayed below 300,000for 123 consecutive weeks. This run is the longest since the 1970s. Analysts said that low jobless claims indicate a very low rate of layoffs.
Consumer sentiment dropped by two index points from 95.10 to 93.10 percent. Rising mortgage rates and concerns about current events likely contributed to wavering consumer sentiment.
What‘s Ahead
This week’s scheduled economic readings include NAHB Housing Market Indices, Commerce Department reports on housing starts and building permits issued and weekly releases on mortgage rates and new jobless claims.
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About the Author:
Babak Moghaddam graduated from University of Southern California in 1985. He entered the mortgage industry as a compliance auditor at the Bank of New York in 1986 and completed his masters in Business Administration two years later. After seventeen years in the traditional mortgage banking world Babak finally transformed this vision into his own practice in 2002 when he formed Charter Pacific Lending Corp, a mortgage company that has provided over $900 Million in residential real estate loans throughout Southern California. Babak and his team do things a little differently than other mortgage providers. They work as financial advisors, because they have come to realize that a mortgage is a very powerful financial tool. And just like any other financial tool, it should be managed as part of the overall financial management plan to reach every home owner’s long and short-term financial goals much faster. You can contact Babak for a free consultation and strategy session at (800) 322-1217 X103.