We have an eventful economic calendar this week. One highlight is Wednesday's interest rate announcement from the Fed's rate-setting committee. And there are reports on home sales and prices, as well as economic output and inflation. If any of these spring a surprise, there could be a modest effect on mortgage rates.
Wednesday's decision on short-term interest rates is foregone. The Federal Open Market Committee will keep the federal funds rate at close to zero percent, and the panel will continue to say that it plans to keep rates exceptionally low for at least several more months.
If there's any drama to the Fed announcement, it will come from the brief economic summary in the first paragraph. The last time the Fed met, April 28, it said that "economic activity has continued to strengthen and that the labor market is beginning to improve." The assessment could be more downbeat this time.
Tuesday brings the Realtors' report on existing home sales in May. At the same time, we'll get a report on home resale prices from the Federal Housing Finance Agency, the body that oversees Fannie Mae and Freddie Mac.
FHFA tracks the values of individual houses over time. The Realtors' report, on the other hand, measures median house prices, so its price index can be distorted by changes in the mix of houses that are sold. For example, the homebuyer tax credit brought out first-time buyers, who tend to buy smaller houses. So this spring the median home price went down -- not only because home prices were falling in general, but also because first-timers were buying smaller, cheaper houses.
Wednesday morning brings us the Census report on new home sales and prices.
Friday brings another revision for gross domestic product in the first quarter. The consensus is that the report will say that the economy grew at a 3 percent annual rate in the first three months of the year.
The GDP report includes an inflation measurement -- on that the Fed pays a lot of attention to -- called the GDP implicit price deflator. The consensus is that the price deflator will reflect inflation at an annual rate of 1 percent during the first quarter. That would be a downward revision of the previous estimate of 1.1 percent.
If investors believe that first-quarter inflation was even tamer than the initial estimates, then they're acknowledging that economic growth is slower than they had hoped a few months ago. This belief helps to explain why mortgage rates are so low right now. The mortgage market is looking for any indication of strengthened economic growth as an impetus to raise rates.