“I would say that my outlook for unemployment and my outlook for inflation both point to a need for more accommodation than is currently being provided by the FOMC.”
Mixed movement in mortgage interest rates came with mixed economic news this week.
Two weeks before the next Federal Reserve policy-making meeting, a Fed official suggested the Fed not pull back from its economic stimulus efforts and jobless claims dropped to a five year low.
The Fed news may have helped push the average rate on the longer term 30-year fixed-rate mortgage (FRM) down to 3.38 percent, with an average 0.7 point, the week ending Jan. 17.
Freddie Mac’s weekly Primary Mortgage Market Survey said a week ago, the 30-year FRM averaged 3.40 percent. A year ago, it averaged 3.88 percent.
A non-voting member of the Federal Open Market Committee, Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said before the Financial Planning Association of Minnesota, the Fed is not doing enough to bring down the unemployment rate.
He says a 5.5 percent unemployment rate is a better target for Fed efforts than the 6.5 percent goal it announced last month.
“I would say that my outlook for unemployment and my outlook for inflation both point to a need for more accommodation than is currently being provided by the FOMC,” Kocherlakota said.
In September last year, the Fed also said it would provide economic stimulus to keep interest rates low at least through mid-2015, but recently backpedaled suggesting those efforts could stop by the end of 2013.
Meanwhile, as a sign the economy is growing in the direction Kocherlakota seeks, first-time claims for unemployment sank by 37,000 in just one week to the lowest level since January 2008, according to the U.S. Labor Department.
A stronger economy tends to push rates up or keep them from falling.
For the 5-year Treasury-indexed hybrid adjustable rate mortgage (ARM), the average interest rate was 2.67 percent, with an average 0.6 point, also unchanged from last week and down from the average 2.82 percent a year ago.
Finally, for the week ending Jan. 17, Freddie Mac reported the 1-year Treasury-indexed ARM averaged 2.57 percent, with an average 0.4 point, down from 2.60 percent last week. It averaged 2.74 percent a year ago.