Weekly economic and financial commentary

Summary

United States: The Housing Market Begins to "Reset"

• Fed Chair Powell presented the Federal Reserve's semiannual Monetary Policy report to Congress this week. In his testimony, he acknowledged that tightening monetary policy in order to reduce inflation may result in a recession. Higher mortgage rates are weighing on home sales. During May, existing home sales fell 3.4%, the fourth straight decline. New home sales rose 10.7% in May, although are down 5.9% year-to-year.
• Next week: Durable Goods (Mon), Personal Income & Spending (Thu), ISM Manufacturing (Fri)

International: Global Trends of Slowing Growth, Elevated Inflation and Rising Rates Continue

• The Eurozone services PMI fell noticeably in June, signaling slower growth ahead. However, as inflation pressures intensify, we still expect the European Central Bank to raise interest rates in July. The Norges Bank delivered a hawkish surprise, raising its policy rate by 50 bps to 1.25% this week. Meanwhile, in Canada, solid retail sales and rapid inflation mean we now expect the Bank of Canada to hike rates 75 bps at its July monetary policy meeting.
• Next week: China PMIs (Thu), Japan Tankan Survey (Fri), Eurozone CPI (Fri)

Interest Rate Watch: SOMA Starts Up Quantitative Tightening

• This month, the Federal Reserve officially began implementing its balance sheet normalization plan as billions of principal payments on Treasury securities and agency mortgage-backed securities were not reinvested in the New York Fed's System of Open Market Accounts (SOMA).

Credit Market Insights: True Impact of Rising Mortgage Rates Remains to Be Seen

• Mortgage rates climbed again this week as Freddie Mac reported the average 30-year fixed-rate mortgage rose to 5.81%. The upshift in mortgage rates has fueled a rapid shift in the recently red-hot housing market.

Topic of the Week: Stanley Cup Finals: Colorado vs. Tampa Bay

• The Colorado Avalanche and Tampa Bay Lightning are facing off in the 2022 Stanley Cup Finals. The Avalanche lead the series 3-1 and have home-ice advantage in Game 5 where they will take on the Lightning at Ball Arena in downtown Denver.

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