Overview: Over the past week, neither the Federal Reserve meeting nor the economic data caused much reaction in financial markets. Mortgage rates fell slightly to new record-low levels.
As expected, the Fed held rates steady and did not announce any policy changes at Wednesday’s meeting. According to the statement, “the path of the economy will depend significantly on the course of the virus.” Fed Chair Jerome Powell repeated that the Fed will use all available tools for as long as needed to support an economic recovery. In coming months, investors will be watching to see if the Fed will provide even more monetary stimulus beyond the massive programs already put in place since the outbreak of the pandemic.
The economic data released over the past week continued to show that the housing market has been recovering more quickly than expected. Following weakness in March and April due to the pandemic, home sales have roared back. In June, new home sales jumped 14% from May to the best level since July 2007 and were solidly higher than a year ago at this time. Pending sales of previously owned homes in June surged an even stronger 17% from May.
Looking ahead, investors will continue watching for news about plans for reopening the economy, medical advances to fight the pandemic, Fed monetary actions, and government stimulus programs. Beyond that, second-quarter gross domestic product (GDP), the broadest measure of economic growth, will be released on Thursday, and forecasts are for a massive decline in the range of 30% to 40% due to the partial shutdown of the economy. The core Personal Consumption Expenditures (PCE) Price Index, the inflation indicator favored by the Fed, will come out on Friday. The Institute for Supply Management (ISM) Manufacturing Index will be released on Monday.
New Home Sales (thousands)