No Surprises from Fed 

There was plenty of major economic news this week, but few surprises. The Fed meeting had little impact on mortgage markets, and the latest inflation data matched expectations. Mortgage rates ended the week a bit lower.

Gross Domestic Product (GDP) is the broadest measure of economic activity. During the fourth quarter of 2024, U.S. GDP rose at an annualized rate of 2.3%, below the consensus forecast of 2.6% and down from 3.1% during the third quarter. Consumer spending and government spending were two of the biggest contributors to the growth during the quarter, while a decline in inventories subtracted substantially from it. In addition, business investment dropped for the first time in more than three years.

As expected, the Fed made no change in the federal funds rate on Wednesday, and the statement released after the meeting was very similar to the prior one. Investors did initially focus on one alteration which removed a reference to inflation making progress toward the target level of 2.0%. However, during the press conference following the meeting, Chair Powell reassured investors that this change in language was not intended to convey any new information. Beyond this, Powell responded to questions about the impact of potential policy changes under the new administration by saying that the level of uncertainty has increased in the short-term, but future decisions will continue to be based on incoming economic data.

Investors will continue to look for additional guidance from Fed officials on their plans regarding future monetary policy. For economic reports, the ISM national manufacturing index will be released on Monday and the services sector index on Wednesday. The JOLTS report measuring job openings will come out on Tuesday. The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched.