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August's Housing Starts was posted early this morning, revealing a 12.3% jump in new home groundbreakings last month. That was stronger than expected, hinting at housing sector strength. As with most signs of economic strength, we should consider the data bad news for bonds and mortgage pricing. However, this is not considered to be highly important data, meaning it has had little impact on this morning's trading.
The big events will take place this afternoon. This week's FOMC meeting will adjourn at 2:00 PM ET. The Fed is expected to make a quarter-point cut to key short-term interest rates, but some analysts are calling for a half-point move. Also at 2:00 PM, they will release their revised economic projections for the U.S. The markets are interested in whether Chairman Powell and friends think economic conditions will be stronger or weaker in the coming months and years than previously thought. Key readings the markets will be looking for are the unemployment rate, inflation and overall GDP growth. Downward revisions by the Fed will be good news for bonds and mortgage pricing because it would mean another reduction to key short-term interest rates before the end of the year may happen. On the other hand, upward revisions that indicate the economy is likely to be strong enough that they will not need to reduce rates again this year could cause bond selling and an increase to mortgage rates.
The adjournment, post-meeting statement and economic projections will be followed by a press conference with Chairman Powell at 2:30 PM ET. All Fed meetings are highly important, but this one is particularly significant for the financial and mortgage markets due to the uncertainty of what exactly the Fed will do now and what future monetary policy moves are expected in the near future. Analysts and market traders will be watching his words carefully for any indication on what the Fed's plans are. Any question or answer at the press conference can impact the markets, so there is a decent chance of seeing quite a bit of volatility later today.
Tomorrow has a couple of minor economic reports scheduled for release. They will be addressed in this afternoon's update, which will come shortly after the markets have an opportunity to react to the FOMC activities.
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