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The Week Ahead: What to Expect from The Fed

Federal Reserve BHThis week brings 2016’s third meeting of the Federal Open Market Committee (FOMC), the policymaking arm of the Federal Reserve. The meeting begins Tuesday with the announcement of their decision on Wednesday afternoon at 2 p.m. Eastern time.

Two FOMC meetings have come and gone this year with no further increase to the federal funds target rate following December’s historic liftoff from near zero rates up to a range of 0.25 percent to 0.50 percent. In the minutes from the FOMC’s March meeting, released earlier in April, the Fed said that a rate hike for the April FOMC meeting was all but off the table.

The Fed noted in the March meeting minutes that “raising the target range as soon as April would signal a sense of urgency (FOMC participants) did not think appropriate.” The central bank remains cautious in moving forward with future rate hikes largely due to the fact that it would be easy to raise the rates during an economic upturn, but considerably more difficult to lower the rates in response to an adverse shock to the economy.

Robert Denk, AVP for Forecasting and Analysis at the National Association of Home Builders (NAHB), stated that “Concerns about the possible economic impact of financial turbulence early in the year motivated participants to err on the side of caution while considering the appropriate timing of the next rate increase.”

FOMC participants expect two rate hikes in 2016 in the six remaining meetings this year. Denk said that a June rate hike is likely if economic gains, such as improvements in the labor market, continue.

The results of a poll released by Reuters on Friday indicated that the consensus among the more than 80 economists polled, including nearly all of the Wall Street primary dealers, was that the Fed will hold off on raising rates in the April meeting while a June rate hike followed by another one later this year is a possibility.

Fifty out of the 80 economists polled by Reuters said they believe that the Fed will raise the target rate in June up to 0.50 to 075 percent; another 20 percent polled said they believe a rate hike is coming in December. The remainder of respondents said they believe a hike is coming in July or December.

Meanwhile, according to Reuters, one economist polled does not believe the Fed will raise rates or even hold rates where they are, but rather cut them by 25 basis points back to their near zero level of 0.00 to 0.25 percent. Two of the economists polled said they believe the Fed will not raise rates at all for the remainder of 2016.

New Home Sales: Monday, April 25

It's no secret that inventory is on the scarce side in the housing market, which is causing a domino effect of issues for homebuyers trying to purchase a home. The mortgage industry is now anticipating where new single-family home sales will fall, following existing-home sales major feat against supply challenges last week.

New single-family home sales and the median home price began the year on weak note in terms of the monthly changes, but there were some optimistic signs behind the data.

According to data estimates from the U.S. Census Bureau and HUD, new single-family home sales in January 2016 were at a seasonally adjusted annual rate of 494,000, down 9.2 percent from the revised December rate of 544,000 and 5.2 percent below the January 2015 estimate of 521,000.

The decline in the median home price "is not because of widespread discounting but rather a result of builders offering more affordably priced entry-level homes," said Realtor.com Chief Economist, Jonathan Smoke.

Here is the lineup for the week:

Monday, April 25, 2016 

U.S. Census Bureau & HUD New Single-Family Home Sales
10:00 A.M. (EST)

Tuesday, April 26, 2016

Federal Open Market Committee (FOMC) Meeting Begins

S&P Case-Shiller Home Price Index (HPI)
9:00 A.M. (EST)

Wednesday, April 27, 2016

National Association of Realtors Pending Home Sales Index
10:00 A.M. (EST)

FOMC Meeting Announcement
2:00 P.M. (EST)

Ocwen Financial's First Quarter Earnings

Thursday, April 21, 2016

U.S. Bureau of Labor Statistics GDP
8:30 A.M. (EST)

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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