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The stock market performed well this week, causing investors to shift some assets from bonds to stocks, which was negative for mortgage rates. The economic data produced little reaction, and mortgage rates finished the week a bit higher.
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On Wednesday, the Fed released the detailed minutes from their last meeting on March 21. Of note, officials expect that U.S. economic growth will be stronger than average for the next few years. In addition, they are more confident that inflation, which has remained below their desired level for years, will rise to their target of a 2.0% annual rate. At the meeting, officials also discussed changing the language used to describe their stance on monetary policy to give investors a clearer sense of their goals. Since the financial crisis, it has been "accommodative" to help boost economic growth. At some point, officials expect that this should be changed to "neutral," meaning that it neither supports nor restrains growth.
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The two most widely followed inflation indicators are the Consumer Price Index (CPI) and the PCE Price Index. To determine trends, investors generally prefer to look at the core readings, which exclude the volatile food and energy components. The most recent data for core CPI showed that it was 2.1% higher than a year ago, up from an annual rate of 1.8% last month.
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The expected large increase occurred because a very weak month dropped out of the 12-month period used in the calculation. This was the highest level since May 2017. However, Fed officials favor the core PCE price index to measure inflation, and it tends to be about 0.3% to 0.5% lower than core CPI each month, so inflation remains below the desired level in the view of most Fed officials. The next release of the PCE price index will take place on April 30.
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The most significant economic data next week will be Retail Sales, which will be released on Monday. Consumer spending accounts for about 70% of economic activity in the U.S., and the retail sales data is a key indicator. NAHB Housing also will be released on Monday. Industrial Production, another important indicator of economic activity, and Housing Starts will come out on Tuesday.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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All material Copyright © Ress No. 1, LTD (DBA MBSQuoteline) and may not be reproduced without permission.
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