Mortgage rates dropped significantly last week.

The Federal Reserve increased the federal funds target rate by 75 basis points at the July meeting, in line with market expectations. But comments from Fed Chair Powell after the meeting were interpreted by many investors as more dovish than prior communications. In addition, several economic indicators pointed to slowing economic activity; GDP declined for the second quarter in a row, new home sales slowed, and consumer confidence dropped due to inflation and recession concerns. Investors reacted by driving longer term rates – such as yields on 10-year treasuries and mortgage-backed securities– lower, predicting the Fed will have to slow down rate hikes and potentially ease rates sooner than previously expected. Primary mortgage rates fell in turn.

This week markets will be focused on additional comments from Federal Reserve members to understand both their commitment to fighting inflation and their willingness to potentially further slow economic activity as a result. Jobs data later this week will provide an update on how tight labor markets are and could influence investors’ expectations of future Fed actions and views on recession risk.