Sentiment on tax plan to guide mortgage rates
Do you ever wonder what the Federal Reserve talks about during their monetary policy meetings? It’s nacho business. Happy National Nacho Day!
It was announced earlier today that New York Federal Reserve President William Dudley will retire his position in February. With Janet Yellen and Dudley leaving the Fed there is speculation that the philosophical tilt of the Fed could become less accommodative which is not friendly for interest rates.
What is friendly to interest rates is a weaker than expected jobs report and that is what was delivered on Friday. The report showed only 261,000 new jobs were created in October and that wage growth was modest. Analysts had expected 300,000 new jobs to be announced.
Mortgage rates improved moderately last week breaking a seven week trend of worsening. Will they continue to improve? Much will depend on the progress of the GOP tax plan which was unveiled last week. The plan, which is not supported by the National Association of Realtors, relies heavily on deficit spending which means the US Treasury will need to issue more debt. All else being equal a greater supply of debt means yields move higher.
Therefore, as sentient shifts in favor of the tax overhaul becoming law I expect home loan rates to worsen and vice versa.
Current Outlook: cautiously floating