Housing Data and Fed Outlook
In October, US home starts and building permits fell 3.1% and 0.6% respectively, which was below expectations. However, a year-on-year increase in housing completions helped offset the bleak construction outlook.
The housing data had a limited impact as markets remained focused on inflation and employment data for Fed rate decisions. According to the CME FedWatch Tool, the probability of a Fed rate cut in December rose from 58.7 on November 18 to 58.9 on November 19.
Expert views on the Fed Rate Path
Parker Ross, chief economist at Arch Capital Group, commented on inflation and the Fed’s interest rate path: to report,
“The Fed is still on track to cut by 25 basis points in December, but the pace will slow thereafter if the economy remains on its current trajectory. Implications for the housing market: Because interest rates are unlikely to decline materially in the near term, sales are likely to remain choppy around historically low rates.”
Parker Ross added that the chances of a 25 basis point rate cut in December were closer to 50:50, with only two further rate cuts expected before 2025.
PBoC disappoints markets
On Wednesday, November 20, the People’s Bank of China maintained the 1-year and 5-year prime rates (LPR) at 3.1% and 3.6%, respectively. The decision disappointed investors who were hoping for further policy measures to boost demand.