|Based on the economic news over the past week, it would not have been surprising to see a large increase in mortgage rates. With stronger than expected economic data nearly across the board, hawkish comments from the Fed, and a stock market rally, the first half of the week indeed was rough on rates. Once all the news was out, however, mortgage rates recovered their losses and ended the week with little change.|
|Housing starts in January also surpassed expectations. The biggest surprises, though, were two regional manufacturing indexes which beat the consensus by a wide margin, one of which reached the highest level since 1984. In addition to these reports, the CPI and PPI inflation data for January came in above the expected levels. Increasing economic activity and rising inflation are not good for mortgage rates.|
|Early in the week, Fed Chair Yellen delivered her semi-annual testimony to Congress. Her comments were viewed as more hawkish than expected. Yellen stressed that it would be "unwise" to wait too long to raise the federal funds rate. She also said that in coming months the Fed will consider when to begin to reduce the Fed’s portfolio of mortgage-backed securities (MBS). On the plus side, she pointed out that the Fed will do so very gradually. However, demand for MBS from the Fed has helped push down mortgage rates in recent years. The possibility of reduced demand put upward pressure on mortgage rates.|
|Looking ahead, the minutes from the February 1 Fed meeting will come out on Wednesday. These detailed minutes provide additional insight into the debate between Fed officials and have the potential to significantly move markets. Existing Home Sales will be released on Wednesday and New Home Sales will come out on Friday. Mortgage markets will be closed on Monday in observance of Presidents Day.|
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