Best Day of the Year for Mortgage Rates Following Fed
Mortgage rates plummeted today, relatively speaking. While the average improvement of 0.10% might not look like much at face value, it’s the biggest one-day drop we’ve had in 2015, and in a league with very few other players historically. The motivation for today’s movement was twofold, but certainly the biggest factor was the Fed announcement and Yellen’s press conference. In short, markets falsely assumed that the recent run of super strong Nonfarm Payrolls numbers (the “jobs report”) would materially accelerate the Fed’s rate hike outlook. Beyond that, too much focus had been placed on the word “patient” as an important indicator of the Fed’s stance.
Not only did we see a Fed that looks just as committed to patience (despite removing the word itself from the statement), we also saw significant downgrades in the inflation and growth outlook. While the Fed may say that they expect inflation to pick back up after the temporary effects of low oil prices work their way through the economy, IF inflation DOES NOT pick back up, today’s statement suggests they won’t be keen to hike rates. This is also in line with recent speeches from the more influential Fed members (like Yellen) who have said they expect inflation to go lower before it goes higher.