Overview: It was a volatile week for mortgage markets, mostly due to comments from Federal Reserve Chair Jerome Powell. In the end, however, the movements were mostly offsetting, and mortgage rates climbed just slightly higher.
In semi-annual testimony to Congress, Fed Chair Powell warned that monetary policy could be even tighter than anticipated as the battle against inflation intensifies. According to Powell, the federal funds rate might need to rise to a higher level and remain there longer if future economic data comes in stronger than expected. In addition, he said that upcoming rate hikes could be 50 basis points rather than just 25 basis points if necessary. He assured lawmakers that the Fed is “taking only measures we have to” in order to bring inflation down. Following his remarks, investors raised their outlook for the terminal (peak) federal funds rate and the length of time at that level, causing mortgage rates to climb. After the dust settled, though, investors decided that Powell’s comments really weren’t too surprising, and the net effect on mortgage rates was minor.
Perhaps the most significant economic report released this week, from the Institute of Supply Management (ISM), revealed that the services sector of the economy continues to grow despite tighter Fed policy. The ISM Services Index was 55.1, close to expectations, and readings above 50 indicate that the sector is expanding. Since the reopening of the economy, people have been shifting their spending from goods back to services such as travel and entertainment.
The latest data from the Job Openings and Labor Turnover Survey (JOLTS) report indicated that the labor market remains very tight. At the end of January, there were a massive 10.8 million job openings, over 4 million more than in January 2020 prior to the pandemic. There were an incredible 1.9 job openings for every available worker. A high level of openings reflects a strong labor market, as companies struggle to hire enough workers with the necessary skills. A very large number of employees also willingly left their jobs in January. This is viewed as a sign of labor market strength as well, since people usually quit only if they expect that they can find better jobs.
ISM Services Index
Week Ahead
March 10
Employment Report
March 14
Consumer Price Index (CPI)
March 15
Retail Sales report
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