Updated on September 25, 2018 10:30:05 AM EDT
Today’s only relevant economic data did nothing to help the cause, showing much stronger than expected results. The Conference Board announced at 10:00 AM ET that their Consumer Confidence Index (CCI) for September rose to 138.4 from August’s revised reading of 134.7. Analysts were expecting to see a decline in this index that measures consumer willingness to spend. It was also the highest reading in 18 years, indicating consumers are more comfortable with their own financial and employment situations than they have been in quite some time. This is bad news for bonds and mortgage rates because higher levels of confidence means consumers are more willing to make a large purchase in the near future, fueling economic growth.
Augusts New Home Sales will start tomorrow’s activities at 10:00 AM ET. The Commerce Department is expected to say that sales of newly constructed homes rose last month, indicating the new home portion of the housing sector strengthened a little. This report will likely not have a noticeable impact on mortgage rates unless it differs greatly from forecasts. It is the weeks least important report in terms of potential impact on mortgage rates, partly because it covers only the small portion of all homes sales that last weeks Existing Home Sales report did not.
The big events come during afternoon trading tomorrow. They start with the FOMC meeting that is widely expected to yield a quarter-point increase to key short-term interest rates. It will adjourn at 2:00 PM ET. What will be of interest is verbiage in the post-meeting statement that may hint when the Fed will make their next move. There is a consensus that they will make another move in December’s meeting, their fourth of the year.
Also at 2:00 PM ET tomorrow, the Fed will release their revised economic projections for the U.S. The markets are interested in whether Chairman Powell and friends think economic conditions will be stronger or weaker in the coming months and years than previously thought. Key readings the markets will be looking for are the unemployment rate, inflation and overall GDP growth. Downward revisions by the Fed will be good news for bonds and mortgage pricing because it would mean another bump to key short-term interest rates before the end of the year may not be a sure thing after all. On the other hand, upward revisions that indicate the economy is likely to support a Fed rate hike could cause bond selling and an increase to mortgage rates.
The adjournment, post-meeting statement and economic projections will be followed by a press conference with Chairman Powell at 2:30 PM ET. All Fed meetings are highly important, but this one is particularly significant for the financial and mortgage markets due to the uncertainty of when the Fed will make another monetary policy move and their expectations for next year. Analysts and market traders will be watching his words carefully for any indication on what the Fed’s plans are. Any question or answer at the press conference can impact the markets, so there is a decent chance of seeing quite a bit of volatility tomorrow afternoon.
©Mortgage Commentary 2018