The biggest economic focus this week was the Fed’s decision to increase the federal funds rate after seven years of holding near zero. Mortgage rates ended the week a little higher as a result.
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The increase decision was no surprise after the Fed had previously noted factors of an improving labor market and overall economic conditions. The Fed has projected only gradual rate increases and expects to keep the funds rate “accommodative”. Though the federal funds rate doesn’t directly influence mortgage rate fluctuations, the rate hike will eventually cause mortgage rates to trend higher.
Another large indication of the economy's wellbeing, the Consumer Price Index, was released Tuesday and showed the core rate, which excludes food and energy, came in at an expected moderate gain of 0.2 percent.
The Housing Market Index showed that home builders are reporting strong but slowing activity. The December market index was 62 versus 65 in the two previous months. Traffic is lagging, down 2 points to 46, reflecting a lack of first-time homebuyers in the market for a newly built home. Housing permits surged last month, up 11 percent from October.
Last week in the economy:
- Mortgage rates (the national average) increased 0.05% (5 basis points).
- The purchase index of MBA Mortgage Applications saw little change for the December 11 week. The refinancing index was up 1 percent and purchase applications fell 3 percent. Year-over-year purchase applications are very high, up 34 percent.
- Initial Jobless Claims are low, pointing to a stable labor market. After a spike in the week prior, initial claims fell 11,000 in the December 12 week.
- The Bloomberg Consumer Comfort index trended up for the second straight week, up to 40.9 from 40.1.
What's on the economic calendar for the week of December 21, 2015:
Tuesday: GDP & Existing Home Sales
Wednesday: New Home Sales, MBA Mortgage Applications & Consumer Sentiment
Thursday: Jobless Claims & Bloomberg Consumer Comfort Index
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