Bets are on no mortgage rate hike this week.

Economists rejoice! here is some background data on possible interest rate movement this week - courtesy of Steve McGirr at Verdeo Funding....

Mortgage Bonds are trading lower, but improved from their worst levels, in response to hot consumer inflation readings, delivered this morning via the Personal Consumption Expenditure (PCE) data. The headline PCE number is on fire, showing overall inflation climbing 0.8% for June - the highest jump in 27 years - and left the year-over-year headline reading at a beefy 4.1%. The Core PCE, which excludes food and energy, jumped 0.3% in June, which left the year-over-year Core PCE at a heated 2.3%. This is up from last month's reading of 2.1% and above the Fed's comfort zone of 1 - 2%. Other components of the report, Personal Income and Spending, were reported near expectations and garnered little attention, especially in light of the hot inflation readings. These stubbornly high consumer inflation readings continue to apply pressure on the Fed, which must weigh future monetary policy decisions amidst a sluggish economy and weak labor market.
Speaking of the Fed and monetary policy, the Fed is meeting as we speak, and tomorrow at 2:15pm ET will announce their interest rate decision and policy statement. We expect the Fed to keep the Fed Funds Rate rate at 2.0% for now, although we expect dissention amongst the voting members - inflation hawks like Philadelphia Fed President Charlie Plosser will likely call for a rate hike to fight inflation. Currently, the Fed Fund Futures suggest a 93% probability there will be no change in rates, and a 7% probability of a 25bp rate hike.
Fundamentally, inflation is pressuring Mortgage Bonds lower, and technically, a heavy layer of resistance is also keeping a lid on any advance. For now, we can try and be patient and see if Bonds can further recover from their earlier losses, especially since we have a cushion via some positive changes from 10am.

For detailed real estate market information for the Sacramento region please visit www.HotFolsomHomes.com