During
the past week, comments from a Fed official increased investor
expectations for a Fed rate hike this year, causing mortgage rates to
move a little higher. The week's economic data was mostly right on
target and had little net effect.
On Tuesday, Fed member Dennis
Lockhart gave investors the impression that the first federal funds rate
hike is likely to take place soon. In essence, he said that he believes
that a rate hike will be appropriate in September unless the economy
significantly underperforms expectations. While other Fed officials may
feel differently, investors took this as a warning to be prepared for a
rate hike at the next Fed meeting on September 17.
The major
economic reports released since Lockhart's comments showed that the
economy remains on track to meet his requirements for a rate hike.
Wednesday's ISM Services data revealed an unexpectedly large increase to
the highest level since 2005. Friday's Employment data, the biggest
report of the month, matched the consensus forecast across the board.
The economy continued its pace of strong job gains above 200K with the
addition of 215K jobs in July. The Unemployment Rate remained at 5.3%.
Average Hourly Earnings, an indicator of wage growth, were 2.2% higher
than a year ago.
Looking ahead, we will get more labor market
data on Tuesday with the JOLTS report, which measures job openings and
labor turnover rates. After that, Retail Sales will be released on
Thursday. Since retail sales account for roughly 70% of economic
activity, this is one of the biggest reports of the month. Industrial
Production, another important indicator of economic activity, will come
out on Friday. In addition, there will be Treasury auctions on Tuesday,
Wednesday, and Thursday.
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