The long-awaited week has come and within expectations, the Federal Reserve has decided to reduce interest rates for central banks by 50 basis points. This is the bigger of the two options for a rate cut, with the lesser being 25 basis points. The impact of this cannot be understated as this gives an official nod that the economy is in a good spot and inflation is under control, according to the Federal Reserve’s outlook on the data. The only black mark on the week of releases is the U.S. Leading Economic Indicators showing the economy has been in a slower trend for the past 6 months. The Federal Reserve, despite the rate cut, has continued to remain hard in its stance about not cutting rates too quickly. This will likely depend on future data.
Federal Reserve Rate Decision
The Federal Reserve cut its policy interest rate by half a percentage point on Wednesday, a more aggressive move than many economists expected. The central bank opted to start “with a bang,” said Paul Ashworth, chief North America economist at Capitol Economics.
U.S. Economic Indicators
The leading indicators for the U.S. economy sank 0.2% in August, the privately run Conference Board said Thursday. That is the sixth straight monthly decline. The index fell 0.6% in July. The leading index is a composite of 10 forward-looking components designed to show whether the economy is in danger of falling into recession and where the economy is headed in the near term.
Primary Mortgage Market Survey Index
- 15-Yr FRM rates saw a decrease of –0.12% with the current rate at 5.15%
- 30-Yr FRM rates saw a decrease of -0.11% with the current rate at 6.09%
MND Rate Index
- 30-Yr FHA rates saw a 0.02% increase for this week. Current rates at 5.70%
- 30-Yr VA rates saw a 0.03% increase for this week. Current rates at 5.72%
Jobless Claims
Initial Claims were reported to be 219,000 compared to the expected claims of 229,000. The prior week landed at 231,000.
What’s Ahead
Following the rate decision, we have another important inflation report with the PCI Price Index, the Federal Reserve’s preferred inflation indicator, which is followed up by the GDP Estimates for the year. Consumer Confidence should also play a role, albeit a much smaller one.