While there is May housing data, existing home sales, the NAHB June housing market index, May starts and permits, and a couple of other key economic measurements, none of the data trumps the big event this week—the FOMC meeting that concludes on Wednesday afternoon. After the recent spike in interest rates there is talk that the Fed will confirm that it will continue the current levels of purchase instead of any curtailing of the amount of its monthly purchases. The economy isn’t recovering at the rate the Fed has said it wants to see before backing away from supporting the bond and mortgage markets. On the other hand, there is as much talk that the Fed is about to taper its purchases.
The normal policy statement that is released after the meeting will be followed by Bernanke’s press conference where he will field questions. He will be pushed for specifics; how he responds will likely set the stage for the next move in long term interest rates, including the mortgage markets. Unemployment remains high, which he has said many times is one of the keys to when the Fed will end its support for interest rates. Inflation is not a problem other than it is lower than what the Fed has said is their target at 2.0%. Technically the bond and mortgage markets continue to reflect bearish readings. Look for volatility to increase later this week after Wednesday’s Fed comments and Bernanke’s press conference.