As the holiday shopping season unfolds, retailers were giddy in October due in part to strong sales for motor vehicles and building materials. Retail Sales jumped 0.8% versus the 0.5% expected and were up from 0.1% in September. It was the largest increase since May's gain of 1.2%. The Core rate rose 0.7%, above the 0.5% expected. Consumer spending accounts for more than two thirds of U.S. economic activity.
Last night, Fed Chair Powell said that the U.S. economy is strong and "is in such a good place right now" but could face issues from a global slowdown in 2019 as the Fed weighs the pace of future interest hikes. Powell said the Fed's goal is to "extend the recovery, expansion, and to keep unemployment low, to keep inflation low," reports Bloomberg. The Fed is expected to raise the short-term Fed Funds Rate by 0.25% at next month's FOMC meeting bringing that benchmark rate to 2.50%. That will directly push the Prime Rate to 5.50% which is derived by Fed Funds Rate (2.50%) + 3 = 5.50%.
Mortgage rates remained unchanged in the latest week despite the volatility in the U.S. financial markets. A moderation in inflation due in part to lower oil prices along with somewhat subdued wage growth held rates steady. Freddie Mac reports that the 30-year fixed-rate mortgage was unchanged at 4.94% in the week ended November 15, with an average 0.5 in points and fees. Freddie Mac says average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
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