Today there will be a vote in the House on the Fair Trade Act which basically will designate China as a currency manipulator. The next step is for the bill to be sent to the Senate. It is not expected to pass in the Senate, at least before the November 2 elections and the November G-20 meeting (Korea Nov 11-12).
A slow economic recovery and the possibility of a Fed policy change helped Austin mortgage rates move a little lower again this week. As a result of recent weak economic data, the Fed is reportedly considering the purchase of additional mortgage-backed securities (MBS) to replace maturing securities. These factors, along with limited inflation, make current economic conditions supportive of low Austin mortgage rates.
The FOMC kept the short term Fed Funds rate unchanged (between 0% and .25%) with a 9 to 1 vote. They also commented that economic conditions warrant exceptionally low levels of the Fed Funds rate for an extended period. Kansas City Fed President Thomas Hoenig was the lone dissenter, citing against the policy believing that a repeated expectation could lead to the buildup of “financial imbalances” and run the risk of macroeconomic and financial instability.
Mortgage pricing is trying to work its way back from the lows of the early morning trade. We are not out of the woods yet, although I wouldn’t expect this trade session today to be very volatile facing tomorrow morning’s Employment report. From what we are seeing, the estimates are anywhere’s from 100k to 130k job losses vs the 190k number from the previous report. I am leaning more towards the -110k mark at this point. Expectations are for the unemployment rate to stay at the 10.2% previous month number, as well as avg hourly earnings and avg work week numbers to stay the same as well.
FOMC announced that it will only purchase about $175 billion of agency debt , slightly less than the $200 billion it previously announced. It continues to anticipate that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period”, an expectation it has repeated in every release since March. Fed now says household spending “ appears to be expanding”, a more optimistic outlook than the path Fed members saw in September. The Fed also repeated its assumption that economic activity will “likely remain weak for a time” and that stimulus measures combined with market forces will contribute to a gradual resumption of growth. Lastly, the Fed continues to see inflation as remaining “subdued for some time”.
