Fed’s Jackson Hole Cancellation Could Signal Low Mortgage Rates

Many people have had to cancel trips in recent weeks as a resurgence of the pandemic in mid-summer pushed Covid-19 infections and hospitalizations to record levels in many states.

Now the country’s central bankers are in the same boat, and this could be a signal that mortgage rates could stay near all-time lows in the weeks to come as the Federal Reserve considers when to start cutting a program purchase of assets that it began in 2020 to help the economy deal with the pandemic.

On Friday, the Federal Reserve Bank of Kansas City announced that it was canceling the Jackson Hole In-Person Economic Policy Symposium scheduled for August 26-28 at the Jackson Lake Lodge in Grand Teton National Park in Wyoming, saying the spread of the contagious hyper-delta variant made it too dangerous.

The annual gathering, set against the backdrop of the Teton Mountain of the Rocky Mountains, will be replaced by a one-day virtual conference on August 27.

“While we are disappointed that health conditions prevent us from being able to meet in person at Jackson Lake Lodge this year as we planned, the safety of our guests and the Teton County community is our priority,” Esther George, president and CEO of the Kansas City Fed, said Friday.

Investors in bonds, especially mortgage-backed securities, are on the lookout for any clues as to when the Fed may start slowing its purchases of Treasuries and mortgage bonds. After the Fed became the market’s biggest buyer in March 2020, accelerating competition pushed mortgage rates below 3% for the first time in July 2020.

According to data from Freddie Mac dating back to 1971, the average US 30-year fixed mortgage rate hit an all-time low of 2.65% in the first week of January. The rate last week was 2.86%, the mortgage securitizer said.

Fixed assets investors may make the Fed’s decision to cancel the rally in person as an acknowledgment that the United States is not yet out of the pandemic, and a sign that it will not rush to extricate itself from it. a monthly commitment to buy $ 80 billion in treasury bills and $ 40 billion in mortgage-backed securities.

After a national immunization program began to open up the economy earlier this year, the Fed’s federal rate-setting committee began discussing reducing asset purchases. The July meeting minutes released last week showed that most FOMC members wanted to start cutting back on their purchases in the second half of the year. This was before hospital intensive care units started filling up with Covid-19 patients who had refused the vaccine or were too young to be eligible.

“The Fed has reassured markets since last year that they will continue to buy bonds as long as there is concern that the pandemic slows the economy,” said Mark Goldman, mortgage broker at C2 Financial Corp. in San Diego. “Now we hear every day that hospitals are full, and that’s not a sign the economy is about to take off.”