The volatility seen so far this year continued over the past week. Economic news provided few reasons for investors to alter their outlook, however, and mortgage rates ended the week with little change.
Heading into the January 27 meeting, expectations were for the Fed not to hike the federal funds rate and for their statement to reflect the economic troubles around the world. Perhaps the biggest open question was whether the Fed would rule out a rate hike at the next meeting in March. On this front, the statement kept open the possibility of a rate hike. Beyond that, Fed officials said that they are keeping a close eye on the effects of slowing global economic growth on the U.S. economy, and they modestly downgraded their assessment of the U.S. economy's performance. Fed officials also expressed less confidence that inflation was gradually rising toward their 2% target.
The most recent housing market data showed nice improvement. Outstanding contracts to buy new homes rose 11% in December, near the best level of the year. Unusually warm weather contributed to the improvement. While existing homes sold in December showed similar improvement, the readings for November and December likely were affected by recently implemented closing disclosure requirements. Since the number of existing homes sold in a month is based on actual closings, delays due to the new requirements pushed some November closings into December.