14 Dec IT’S FED DAY
It’s Fed Day! At noon MST, today we will hear of the first Federal Reserve rate hike of 2016. At the beginning of this year, the Fed set up the market to expect 4 rate hikes in 2016. However, with the lackluster performance of the US economy this year, Fed members changed their tune and decided to hold rates steady. Since the presidential election, consumer confidence has soared higher and the US stock market has continued to set new all-time highs. The rate hike is much needed to help slow the pace of growth we have been experiencing, and will hopefully help slow the pace of the stock market. If that indeed happens, we should see some improvement in interest rates in the weeks to come.
Retail Sales in the month of November grew by 0.1%, which was well below the 0.3% rate anticipated. The Control Group, which strips out gas, autos and building materials, also rose by just 0.1%. In addition, last month’s figures were revised lower. However, they were still very strong.
We also got a look at inflation on the wholesale level, with the release of November’s Producer Price Index (PPI) report. The Headline PPI figure was up 0.4% last month and increased from 0.8% up to 1.3% on a year over year basis. This report was the strongest we have seen in two years. However, much of the move higher can be attributed to the recent rise in oil prices.
Mortgage bonds are back above support. However, interest rates remain near multi-year highs. The Federal Reserve rate hike could help stabilize rates and possibly even help them move a bit lower over the coming weeks. However, there will be great volatility today and likely an increased level of volatility going forward. Mortgage rates initially jumped higher on the news last December when the Fed last raised rates and then came down in the coming weeks. If you have time before you need to close, and are comfortable taking the risk, you can carefully float. If you need to close soon, and are risk adverse, locking could help save you the anxiety of the volatility to come.