US Mortgage Applications Fall
The US Mortgage Bankers Association has now published the useful MBA Mortgage Applications data for the week ended June 13th, this week is showing a drop of -9.2% compared to a 10.3% improvement the previous week.
House price growth will be on the minds of the Federal Open Market Committee (FOMC) as they deliberate in preparation for this evening’s monetary policy announcement. There is really no chance of a change to the US target Fed Funds rate today, this is despite yesterday’s acceleration of price growth above the level at which the Federal Reserve has stated that it is targeting. The Fed typically prefers to deal with the Consumption Expenditures Price Index when it gauges inflation rates within the economy, this is currently lagging behind the more mainstream Consumer Price Index but will no doubt converge over the coming months, which will put pressure on the Fed to act.
The combination of rising prices, falling unemployment and growth pushing 3% will create a situation whereby the fed will need to defend it’s stated “accommodative” stance regarding monetary policy. In this respect the press conference that typically follows the monthly Fed policy announcement will be eagerly watched for any signs that the FOMC is considering a tighten up of monetary conditions within the US economy.
The most likely statement to come today from Fed chair, Janet Yellen, will be a reiteration of the status quo. This will involve a continuation of the pace of asset purchase tapering which will see this program end by November of this year. Whether there will be any row back on the statement that rates will remain near zero until six months after the end of tapering remains to be seen. Overall, today’s Fed event is shaping up to be benign as the US recovery continues at an acceptable pace and the Fed will be conscious not to upset the equation at this juncture.
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