Napa Mortgage News

Dovish Minutes Help Mortgage Rates

In a light week for economic data, dovish comments from the Fed and weakness in global stock markets were favorable for mortgage rates. After frequent wide swings during the week, mortgage rates ended near the lowest levels of the year.

Looking for information about the timing of the first fed funds rate hike, investors were surprised on Wednesday by the dovish tone in the Minutes from the September 17 Fed meeting. In the Minutes, Fed officials highlighted multiple downside risks to their economic growth and inflation goals. Officials noted that weak growth in other countries could slow growth in the US. In addition, they discussed the impact of the recently increased strength of the US dollar relative to other currencies. A stronger dollar reduces US exports, which slows economic growth, and it decreases the cost of imports, which reduces inflationary pressures. These factors favor keeping the fed funds rate near zero for a longer period of time. 

The JOLTS report released this week, a favorite indicator of Fed Chair Yellen, showed that job openings have climbed to the highest level since 2001, up around 25% from the start of the year. There are now just two unemployed workers for each available job, down from a high of nearly seven in 2009. The improving JOLTS data, the strong job gains this year, and the decline in the Unemployment Rate to 5.9% had caused some investors to move forward their expectations for the timing of the first fed funds rate hike. The Minutes effectively squashed this speculation, resulting in an improvement in mortgage rates. 

Next week, Retail Sales and PPI will be released on Wednesday. Retail Sales account for about 70% of economic activity. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products. Industrial Production, Philly Fed Manufacturing, and the NAHB Housing Index will come out on Thursday. Housing Starts and Consumer Sentiment will be released on Friday. Mortgage markets will be closed on Monday in observance of Columbus Day.