Fed Speak Shakes Markets

May 18, 2020jordanreedNews

Last Week in Review: Fed Speak Shakes Markets

Home loan rates remain near historic lows and have stabilized, thanks mainly to the Federal Reserve, as the central bank continues to purchase mortgage-backed securities on a daily basis.

The Fed also helped rates this past week in another way, but it may have been unintentional. Fed Chairman Powell spoke last Wednesday and uttered remarks that lifted uncertainty about the economic recovery. By saying the U.S. is facing an “extended period” of economic weakness, Stocks fell sharply, providing an improvement to rates.

The reality is the U.S. economic recovery is likely to be gradual as states re-open at a slower pace, while consumer demand may take some time to return to more normal levels. At the same time, we should expect the Fed, Treasury, and U.S. government to do whatever it takes to help the economy through this deep, yet temporary, recession — and revive it upon coming out of the other side of the virus.

The next couple of weeks are important to see whether the unemployment rate can decline in states that are re-opening, alongside a continued decline in cases.

Bottom line: Home loan rates are at all-time lows. Even all of the uncertainty and the sharp decline in Stocks could not push rates another leg lower this past week. Anyone with an opportunity to lock a 30-year mortgage, should do so.

Tagged

Related Posts