Yesterday the Federal Reserve renewed its pledge to keep interest rates low for an “extended period” saying that inflation is “likely to be subdued for some time”.
This is positive news for mortgage rates. Not much has changed since the last Fed statement. The tone of the statement suggests a more optimistic outlook on the economy, but it stressed that the economy is in a precarious position and still faces several headwinds – among them unemployment, underutilized capacity, and a large supply of foreclosed homes. It is entirely possible that market forces could drive interest rates higher, but they will not change as a result of Fed actions in the near future.
The Fed statement said “growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit”. It further commented that “the pace of economic recovery is likely to be moderate for a time”.
The latest report from the Labor Department indicates that the labor market is slowly improving, or has stopped deteriorating. Jobless claims fell by 11,000 last week, to the lowest level in a month. This number is right in line with economists’ median expectations. However there was a very slight increase in the four-week jobless claim average, which smooths out some of the volatility in the weekly figure.
Yesterday the Federal Reserve commented that “the labor market is beginning to improve”. This is an improvement from the previous month where the Fed said the labor market was “stabilizing”.
Thus far manufacturing has lead the economy out of the recession, expanding for several consecutive months. However the recovery has largely been jobless, as the unemployment rate has held steady at 9.7 percent. Many economists believe the unemployment number will actually increase before it decreases, as frustrated job seekers resume their job search in anticipation of the improving economy.
What do you think about the most recent batch of economic numbers? Let us know in the comments section below.
Loading ...
RSS feed for comments on this post.
Leave a comment