Fed Policy Unchanged


Overview: Over the past week, the focus was on Wednesday’s Federal Reserve meeting, but it provided no unexpected news or guidance that would cause the outlook for future policy to change. The economic data also had just a minor impact, and mortgage rates ended the week with little change.

 

As expected, the Fed made no policy adjustments, and its meeting statement contained no significant surprises. In March 2020, the Fed began to buy $120 billion of Treasuries and mortgage-backed securities (MBS) each month to help the economy recover from the pandemic. The big question for investors is when the Fed will begin to scale back this activity. Since the end of last year, the Fed has said that the bond purchases would continue until “substantial further progress” has been made toward its labor market and inflation targets. On Wednesday, the Fed simply said that the economy “has made progress” toward these goals without quantifying how much. While some investors were disappointed by a lack of more specific guidance, the meeting provided little reason to change the outlook for future monetary policy.


After four straight months of declines, sales of existing homes in June, which make up roughly 90% of the market, rose modestly from May and were 23% higher than a year ago. Inventory levels were down 19% from a year ago, at just a 2.6-month supply nationally, well below the 6-month supply that is considered a healthy balance between buyers and sellers. The median existing-home price was 23% higher than last year at this time, reaching a new record of $363,300. Sales of new homes, which account for the remaining 10% of the market, did not fare as well. In June, they dropped 7% from May, which was well below expectations and the lowest level since April 2020.

 

Existing-Home Sales (millions)


Week Ahead

July 29 — Second-quarter gross domestic product (GDP)

July 30 — Core Personal Consumption Expenditures (PCE) Price Index

August 2 — Institute for Supply Management (ISM) Manufacturing Index

August 4 — ISM Services Index

August 6 — Employment Report