As has been the case for most of 2016, concern about the pace of global economic growth has been tough on stocks, but has been very good for mortgage rates. Slower growth reduces expectations for future inflation, and this allows mortgage rates to fall. Mortgage rates declined again this week.
The slowing pace of global economic growth, especially in China; declining oil and other commodity prices; and fluctuations in currency exchange rates have been causing turmoil in global stock markets. During Wednesday’s semiannual testimony to Congress, Fed Chair Yellen said that issues such as these may cause the Fed to delay its rate hikes. She added that it now may take longer for the inflation rate to reach the Fed’s target level. This suggests a longer time frame between rate hikes. Many investors now expect that the Fed will not raise the federal funds rate at all in 2016.
Despite the economic problems seen around the world, the U.S. labor market remained a bright spot. Even though the number of new jobs created in January fell from the prior month, the three-month average remains very healthy. The unemployment rate declined to 4.9%, the lowest level since February 2008. Wage growth was stronger than expected, rising 0.5% during the month. Other signs of strength came from the recently released JOLTS data. This report, which is closely followed by the Fed, showed that the number of job openings and the voluntary quit-rate are at or near multi-year highs.
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Source: MBS Quoteline
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