3/22 - Weekly Economic Highlights

The Federal Open Market Committee (FOMC) meeting on Wednesday took center stage this week. As expected, the Committee left interest rates on hold (at 5.25-5.50%) and few material changes were made to their closely watched Summary of Economic Projections (SEP) which is updated every quarter and can give more insight into the near-term path of monetary policy. This provided some relief for bond investors after yields have risen sharply since the start of 2024, with the two-year Treasury yield trading up almost 50 basis points to around 4.75% before the release.

For 2024, the latest SEP showed a stronger real GDP growth outlook of 2.1% from 1.4% in December as labor market and consumer data has been resilient. Core inflation projections nudged up from 2.4% to 2.6%, but the median projection for the Federal Funds rate by the end of the year remained the same at 4.625%, implying three 0.25% cuts. This is in line with Chandler’s long-held view which the market has slowly come around to.

In addition to the FOMC meeting, investors also received a slew of housing data which pointed towards a gradual pick-up in activity from depressed levels. The National Association of Homebuilders Market Index, a barometer of homebuilder sentiment, moved into positive territory in March for the first time since August last year as mortgage rates have stabilized and the government recently proposed measures to help first time buyers. Housing starts rose to an annualized rate of over 1.5 million units in February, from an upwardly revised 1.4 million units in January, as new home construction remains buoyant, while sales of existing homes rose to an annualized rate of 4.4 million units from 4 million in January, well above their recent low of 3.8 million units.

We ended the week with lower Treasury yields, the two-year was trading at 4.60% and 10-year 4.22% at the time of writing. Next week we will be closely watching Personal Consumption Expenditure (PCE) data for February as this is the Fed’s preferred inflation gauge. After surprising to the upside in January, the market will be looking for price increases to have cooled in February for the Fed to remain on track to reduce interest rates later this year.

New Home Sales, Chicago Fed National Activity Index, Durable Goods Orders, S&P Case Shiller Home Price Index, Conference Board Consumer Confidence Index, 4Q GDP (third estimate), University of Michigan Sentiment, Pending Home Sales, Personal Consumption Expenditure Index.

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