How Powerful is the Fed? According to Fed Chair Powell – ‘there’s no limit on how much we can do other than that it must meet the tests under the law…’ As a reminder the Fed’s mandate is to protect the economy against inflation and protect the labor market -or to stabilize prices and foster maximum employment. During the Pandemic the Fed rolled out new tools: in March of 2020 it started purchasing corporate bonds with a goal of helping mid-sized and small businesses. This was followed by a municipal lending program, a junk bond purchase program, and the Fed Chair even encouraged Congress to send people money directly. More recently we have seen the Fed continue to flex their power to in their emergency assistance to help arrest bank runs.
Mortgage Rates ticked down again this week as the price of Mortgaged Backed Securities (MBS) responded favorably to inflation reports and additional instability in the banking sector. Rates are up approximately 1% from this time last year.
Home Values – the Core Logic Home Price Insights showed priced increased rapidly in March and are up over 3% year over year. This 1.6% monthly gain comes on the heels of a 0.8% gain in February, it appears the short dip in prices has reversed. The housing market remains strong and there continues to be a lack of housing supply.
Jobs – the Bureau of Labor Statistics’ (BLS) Job Openings and Labor Turnover report showed 9.6 M openings in March which didn’t meet expectations and was a drop from the previous month. Job openings are at 23-month low. The Leisure and Hospitality sector created the most jobs, but that sector is actually down in openings since the beginning of the year. Layoffs and discharges hit a 27-month high.
Fed – the central bank increased their Fed Funds Rate by 0.25% to 5.25%, the highest level in 16 years. Fed Chair Powell denied there would be rate cuts this year, but the market is anticipating 3 cuts and the Fed does hinted they are on pause for future hikes.
Mortgage Applications to purchase homes declined by 2% last week after increasing 4.6% the previous week. Purchases are down 32% year over year. Refinances increased 1% and are down 51% year over year.