Interest Rates

More stories

  • 88 Shares149 Views

    in Economy

    30-Year Home Mortgage Rate Falls to 6.47%

    by

    The key mortgage rate had its biggest one-week decline of the year, falling to the lowest level in 15 months.Mortgage rates have fallen to their lowest level in more than a year, a balm for prospective home buyers and sellers in a challenging real estate market.The average rate on 30-year mortgages, the most popular home loan in the United States, dropped to 6.47 percent this week, Freddie Mac reported on Thursday. That rate has been steadily easing since April, when it rose above 7 percent — a relief for not only buyers, but also potential sellers who have felt locked into lower rates on their existing loans and have kept their houses off the market.The decline, from 6.73 percent a week earlier, was the biggest this year.Mortgage rates stood at around 3 percent in late 2021. They began climbing when the Federal Reserve started raising its benchmark rate to combat inflation, reaching levels not seen in two decades.“The decline in mortgage rates does increase prospective home buyers’ purchasing power and should begin to pique their interest in making a move,” Sam Khater, Freddie Mac’s chief economist, said in a statement.The decline in mortgage rates could also allow existing homeowners to refinance, Mr. Khater said. The share of market mortgage applications that reflect refinancing was the highest in more than two years, according to Freddie Mac.The Fed is expected to start lowering interest rates in September after holding them at 5.3 percent for the past year. Investors increasingly anticipate that the initial cut will be half a percentage point.While the Fed’s benchmark rate and mortgage rates aren’t directly connected, a Fed rate cut could indirectly put even more downward pressure on mortgages. The 10-year U.S. Treasury yield, which underpins borrowing costs, dropped this week as panic ensued after a weaker-than-expected jobs report, contributing to the mortgage-rate movement.Sales of existing homes slipped 5.4 percent in June from a year earlier, according to the National Association of Realtors — a sign of continued sluggishness in the housing market. Homes sat on the market longer, and sellers received fewer offers.The lower mortgage rate could encourage some homeowners to get into the market, said Julia Fonseca, an assistant professor of finance at the University of Illinois at Urbana-Champaign. But as of March, nearly 60 percent of mortgage holders had rates of 4 percent or less, she added, still far from the current cost of borrowing.“It’s a step — but it’s a small step,” Ms. Fonseca said of the latest drop. “We’re moving in the direction of lowering borrowing costs and less lock-in, but we still have a ways to go if we consider how low these rates that people have locked in actually are.” More

  • 113 Shares199 Views

    in Economy

    Stock Markets Signal Recession Fears. Here’s the Economic Outlook.

    by

    The economy has repeatedly defied predictions of a downturn since the pandemic recovery began. Now signs of strength contend with shakier readings.The U.S. economy has spent three years defying expectations. It emerged from the pandemic shock more quickly and more powerfully than many experts envisioned. It proved resilient in the face of both inflation and the higher interest rates the Federal Reserve used to combat it. The prospect many forecasters once considered imminent — a recession — looked increasingly like a false alarm.Until now.An unexpectedly weak jobs report on Friday — showing slower hiring in July, and a surprising jump in unemployment — triggered a sell-off in the stock market as investors worried that an economic downturn might be underway after all. By Monday, that decline had turned into a rout, with financial markets tumbling around the world.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    The number of jobs added in July was the second smallest monthly gain in years.
    Note: Data is seasonally adjustedSource: Bureau of Labor StatisticsBy The New York Times

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    The unemployment rate in July rose to the highest level since October 2021.
    Note: Data is seasonally adjustedSource: Bureau of Labor StatisticsBy The New York TimesSome economists said investors were overreacting to one weak but hardly disastrous report, since many indicators show the economy on fundamentally firm footing.But they said there were also reasons to worry. Historically, increases in joblessness like the one in July — the unemployment rate rose to 4.3 percent, the highest since 2021 — have been a reliable indicator of a recession. And even without that precedent, there has been evidence that the labor market is weakening.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    The Sahm Rule indicator suggests a recession might have already begun.
    Data is seasonally adjusted and shows the change in the U.S. unemployment rate compared with the low point in the previous 12 months. All calculations based on three-month moving average.Source: Federal Reserve Bank of St. LouisBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 113 Shares129 Views

    in Economy

    S&P and Nasdaq Drop as Jobs Report Shakes Market

    by

    Wall Street was jolted by rising economic uncertainty on Friday, and stocks skidded, capping off a turbulent week with a sharp decline.Friday’s drop followed a report on U.S. hiring in July that was far weaker than expected, startling investors into worrying that the Federal Reserve has been too slow to cut interest rates. Traders were already growing uneasy about the state of the economy, as well as the prospects for the big technology stocks that had underpinned a market rally for much of the year, but the jobs report intensified the focus on the risks.The S&P 500 fell 1.8 percent, while the tech-heavy Nasdaq dropped 2.4 percent. Small stocks, yields on government bonds, and oil prices, all of which are sensitive to expectations for the economy, dropped too.Employers in the U.S. added 114,000 jobs in July, on a seasonally adjusted basis, much fewer than economists had expected and a significant drop from the average of 215,000 jobs added over the previous 12 months, the Labor Department said. The unemployment rate rose to 4.3 percent, the highest level since October 2021.“That all-important macro data we have been hammering for months is finally starting to turn in an ominous direction,” said Alex McGrath, chief investment officer at NorthEnd Private Wealth.Investors are reassessing how aggressive the Fed may have to be as it starts to cut interest rates — if weakening economic conditions justify a bigger rate cut than the central bank has indicated so far. The central bank raised rates to a two-decade high as it tried to wrestle inflation under control, but policymakers now have to decide when to cut, and by how much, in order to forestall a recession.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 75 Shares129 Views

    in Economy

    July Jobs Report: What to Know

    by

    The American job market significantly slowed in July, the Labor Department reported on Friday, adding 114,000 jobs on a seasonally adjusted basis.The unemployment rate rose to 4.3 percent.The job gains were smaller than projected.Here’s what else to know:Easing wage growth: Wages rose by 0.2 percent in July compared with the previous month and 3.6 percent from a year earlier. Wage growth has been moderating for more than two years, as the intense competition to hire and retain workers has slackened. But several employers said in interviews that pressure to raise wages was still there.The Fed is watching closely: The Federal Reserve held the benchmark interest rate steady at 5.3 percent at its meeting this week, but Jerome H. Powell, the Fed’s chair, said a rate cut “could be on the table” at its next gathering in September, depending on the data. As Fed officials continue trying to bring down inflation by keeping interest rates elevated, they have also underscored that the central bank’s goal is to maintain a healthy labor market. More

  • 113 Shares159 Views

    in Economy

    Fed Will Scour Jobs Report for Signs of Weakness

    by

    Federal Reserve officials held off on cutting interest rates this week because they want slightly more data to feel confident that inflation is truly coming under control. But while that approach is cautious when it comes to price increases, it could prove to be risky when it comes to the labor market.High Fed interest rates help to cool inflation by slowing demand in the economy. When it costs more to borrow to buy a house or expand a business, people make fewer big purchases and companies hire fewer workers. As economic activity pulls back, businesses struggle to raise prices as quickly, and inflation moderates.But that chain reaction can come at a serious cost to the job market. And as inflation comes down, Fed policymakers are increasingly attuned to the risk that they might overdo it, tipping the economy into a severe enough slowdown that it pushes unemployment higher and leaves Americans out of work.Those concerns were not enough to prod central bankers to cut interest rates at their meeting this week. For now, Fed officials think that the ongoing slowdown in hiring and a recent tick up in joblessness signal that labor market conditions are returning to normal after a few years of booming hiring. But policymakers are sure to carefully watch the July jobs report set for release on Friday for any sign that labor conditions are cracking — and have been clear that they will be quick to react if they see evidence that the job market is taking a sudden and unexpected turn for the worse.“A broad set of indicators suggests that conditions in the labor market have returned to about where they stood on the eve of the pandemic,” Jerome H. Powell, the Fed chair, said during a news conference this week. He later added that “I would not like to see material further cooling in the labor market.”Mr. Powell said the Fed stood prepared to react if the labor market weakened more than expected.While the central bank is already widely expected to lower rates in September, economists think that officials could move them down faster than they otherwise might if the job market is cooling notably. In fact, investors expect the central bank to cut rates by three-quarters of a point — equivalent to three normal sized rate cuts — by the end of the year.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 138 Shares199 Views

    in Economy

    Trump Promises Lower Interest Rates, but the President Doesn’t Control Those

    by

    The Federal Reserve sets interest rates, and it operates independently of the White House. But rates could come down as inflation cools.Former President Donald J. Trump, the Republican candidate for the 2024 presidential race, promised lower interest rates — which a president does not actually control — if he is elected.Asked on Wednesday what he would do on “Day 1” of a new presidency during a panel at the National Association of Black Journalists convention in Chicago, Mr. Trump said one priority would be to “drill, baby, drill,” the shorthand tagline he has adopted for promoting oil and gas production in the United States.“I bring energy way down, I bring, interest rates are down, I bring inflation way down,” Mr. Trump expanded.The president exerts no direct control over interest rates. The Federal Reserve sets a key policy rate, which then trickles out to influence borrowing costs across the economy, and the Fed is independent from the White House.Mr. Trump has at times implied that the Fed will lower rates because inflation is likely to be lower on his watch, which could have been what he meant on Wednesday. Economists have suggested that some of his proposed policies may in fact speed up inflation.Still, the candidate’s comments underscore how politically salient both price increases and high interest rates remain as the Nov. 5 election nears, even after years in which inflation has been gradually cooling. And they make it clear that the coming months are likely to be politically fraught for the Fed as the technocratic institution tries to stay outside the political fray.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 113 Shares129 Views

    in Economy

    What to Watch as the Fed Meets on Wednesday

    by

    The Federal Reserve is expected to leave interest rates unchanged but could set up for a cut later this year.Federal Reserve officials are widely expected to leave their key interest rate unchanged on Wednesday, keeping it at the two-decade high of 5.3 percent for a 12th straight month in a bid to slow economic growth and crush inflation.But investors will be most focused on what comes next for borrowing costs. Economists and traders widely expect Fed officials to cut their policy rate at their next meeting, in September. Wall Street will closely watch for any hints about the future in both the Fed’s statement at 2 p.m. and a subsequent news conference with Jerome H. Powell, the chair of the central bank.While few economists expect an explicit signal on when a rate reduction is coming — the Fed has been trying to keep its options open — many think that central bankers will at least leave the door open to a cut at the next meeting, which will wrap up on Sept. 18. And Mr. Powell is sure to face questions about how officials are thinking about the potential for moves after that. Here’s what to look out for.Watch the Fed’s statement for changes.The Fed’s statement, a slowly changing document that officials release after each two-day meeting, currently states that Fed policymakers expect to hold rates steady until they have “gained greater confidence that inflation is moving sustainably” down.Michael Feroli, chief U.S. economist at J.P. Morgan, wrote in his preview note that the statement could be headed for a small but meaningful tweak: Officials could adjust “greater confidence” to read “further confidence,” or some similar rewording. That would signal that policymakers were becoming more comfortable with the inflation backdrop.There would be a reason for that growing confidence. After proving surprisingly stubborn early in 2024, inflation is cooling again. The latest report showed that the Fed’s preferred index picked up just 2.5 percent over the year through June — still quicker than the central bank’s 2 percent target, but much slower than that measure’s recent peak in 2022, which was above 7 percent.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More