A Federal Open Market Committee (FOMC) Federal Funds Rate increase coincided with news of a compromise tax reform bill, sending mortgage rates slightly lower on Wednesday afternoon – likely due more to the fiscal policy than the Fed news.
After climbing steadily higher over the past week, the prime 30-year fixed mortgage rate quoted on Zillow edged slightly lower today.
Rates were pushed upward last week by the combination of a moderately strong labor market report and inflation data. Friday’s November Employment Report showed strong employment gains, but wage growth remained muted. Consumer price inflation was weaker than expected, but strong producer price inflation could point to higher overall inflation in the months ahead.
Wednesday’s December statement from the Federal Open Market Committee (FOMC) was largely in line with expectations, with the committee voting to increase the benchmark Federal Funds Rate by 25 basis points to a range of 1.25 percent to 1.5 percent – its highest level since 2008. The widely anticipated macro forecasts in the Summary of Economic Projections were also in line with expectations. Additionally, a lot of faces will change at the Federal Reserve beginning in 2018 – including a new Chair and a new slate of FOMC voters – so markets will probably place less emphasis than usual on today’s news.
However, the FOMC increase coincided with news of a compromise tax reform bill, sending mortgage rates slightly lower on Wednesday afternoon – likely due more to the fiscal policy than the Fed news.
Rates could move later this week with markets watching incoming retail sales data for November – which will provide a first glimpse of buying for the 2017 holiday shopping season – and more details on the contours of the Brexit agreement.
