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The Federal Reserve met on Wednesday June 19, 2019 and the observation was that the economy is in a bad situation. To be sure, the Fed left the benchmark rate constant but the concerned tone rang far and wide. Mortgage rates, which wait on the Fed for direction, sank in the wake of the meeting.

Weak economic data, high inflation

In the Fed’s assessment, the economy is slowing. Further, the central bank sent the signal that it could soon cut interest rates. To be sure, the bank noted that uncertainty in the US economy is high and, as such, business investment is grinding to slower rates. In its policy statement, the bank downgraded the state of the US economy from solid last month to moderate.

According to the bank, the level of inflation is a matter of concern. Further, the ongoing trade is hurting the economy, and add to that the moderate growth. Ultimately, bets for rate cuts have increased and analysts see at least two instances before year end.

Mortgage rates react

Usually, the Fed is not in charge of determining mortgage rates but actions such as rate cuts influence their direction. Also, the comments from key Fed officials have the ability to sway the rates in either direction. The concern which the Fed raised in the last meeting is having a not so good effect on mortgage rates.

To be sure, mortgage rates have experienced a consistent decline in the recent past but the trend deepened after the Fed’s meeting. The most recent data from Freddie Mac shows that both the 30-year fixed rate average and the 15-year fixed rate average declined 0.5 points on average. On the other hand, the five-year adjustable rate average fell 0.4 points on average.

Now, the market is anxiously waiting for good news from the G-20 meeting just ahead. It is expected that talks will be held to diffuse the tensions generated by the US-China trade war. As such, analysts anticipate mortgage rates to remain unchanged in the week ahead. Once the news on the trade negotiations are public, there will be a clear direction for the rates, the analysts predict.