May 31st, 2017 4:39 PM by Gene Tidgewell
The Fed meets June 13 and 14, 2017 and comes out with their interest rate decision at 11:30 AM PDT.
WILL THEY RAISE RATES?
Who knows? What we do know is that there decision is based, among other things, on the employment picture and on inflation.
Even though there may be underemployment the Fed feels we are full employment so that is no longer an issue.
The Fed favors Personal Consumption Expenditures (PCE) as a measure of inflation instead of the Consumer Price Index (CPI). April PCE was re\leased May 30the and came in at 1.5 % year over year down from 1.7 % in March and well below the 2.0 % inflation goal of the Fed.
Wage inflation comes out Friday with the jobs report. If it is strong then that may give the Fed the impetus to raise rates June 14. In April wage inflation was at 2.5 % year over year down from 2.7 % in March.
The Mortgage Backed Security market has not yet priced in a rate increase by the Fed on June14th. It has been trading in a narrow range for several weeks and will remain so UNLESS WAGE INFLATION IS STRONG ON FRIDAY or if North Korea keeps firing missiles.
If wage rate inflation is strong look for the Fed to raise the Fed Funds rate and for mortgage rates to move up. If not rates should stay in a tight range unless something on the Geo - political arena crops up.
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