The path ahead for the U.S. economy remains “extraordinarily uncertain,” Powell tells Congress
When the nation’s top central bankers spoke in public this week, they didn’t sugarcoat their outlook for the U.S. economy: What could have been a V-shape recovery if the nation managed to get the COVID-19 virus under control is probably not going to happen now.
Investors considered that, along with the news about the surge in virus infections in states such as Texas and Arizona, and did what they usually do when spooked about the direction of the economy: They piled into the bond markets, boosting demand for mortgage-backed securities.
When competition for bonds such as MBS goes up, it compresses yields, which translates into cheaper interest rates for home loans.
The average rate for a 30-year fixed-rate conforming mortgage, meaning eligible to be purchased by Fannie Mae and Freddie Mac, fell to 3.12% on Monday and Tuesday, as measured by Optimal Blue. That’s the second-lowest daily rate on record, following the 3.1% set on June 11.
Federal Reserve Chairman Jerome Powell said in testimony to the House Financial Services Committee on Tuesday that the path ahead for the U.S. economy remains “extraordinarily uncertain” and that the recovery will depend on containing the coronavirus pandemic.
In a separate speech the same day, New York Federal Reserve Bank President John Williams said a full economic recovery “will likely take years to achieve.”
Meanwhile, in a separate hearing in the nation’s capital on Tuesday, White House pandemic advisor Dr. Anthony Fauci told Congressthe number of new virus cases could soon top 100,000 a day – more than double the current record rate.
After Northeast states bent the curve with strict measures that included mandatory masks, cases in Texas and Arizona are at record highs and some intensive care units have exceeded capacity.
“I can’t make an accurate prediction, but it is going to be very disturbing, I will guarantee you that, because when you have an outbreak in one part of the country, even though in other parts of the country they are doing well, they are vulnerable,” Fauci said.
July 1, 2020, 3:18 pm By Kathleen Howley