It’s been the week of deflation—looming deflation in Europe, deflate-gate in football and ever deflating oil prices. But what does next week have in store?
Yahoo Finance’s Aaron Task, Michael Santoli and Rick Newman along with Trulia chief economist, Jed Kolko came together to discuss next week’s headlines before they become headlines in the Yahoo Finance roundtable.
The FOMC meets on January 27th and the 28th next week. The Swiss Central Bank, the Bank of Canada and ECB all made sweeping moves in the past weeks, so can we expect the same from the Federal Reserve?
“I think we’re done with the Central Bank drama for the time being,” says Rick Newman. “The Fed’s probably going to do nothing whatsoever.” Michael Santoli thinks there is an open question around how they characterize the decline in oil and inflation. He thinks that the Fed’s own economic models show that oil is “rocket fuel for the economy.” They could accelerate, and there could still be a midyear rate hike.
Jed Kolko sees this making an impact on the housing market. Mortgage rates make a big impact on refinancing, he says. Recently he’s seen a small boom in refinancing and expects to see more next week, possibly because of new FHA loan rules that allow lower-income people refinance.
Case-Shiller numbers are out next Tuesday on the heels of this week’s housing starts and existing home sales. Kolko expects to continue to see price gains slowing from where they were earlier this year. “There’s less investor buying and less foreclosures on the market. Those are what gave us that huge rebound in home prices about a year ago. Home prices are slowing around the country, especially in those boom-and-bust west coast markets,” he says.
Santoli believes that we might be “ripe for an upside surprise,” mostly due to factors outside of the housing market like jobs and increasing disposable income.
Greek elections take place on Sunday, which hold the power to shake the European market after its ECB-induced bounce this week.
“Just to handicap this, this is an opposition party that’s likely to win,” says Rick Newman. “They’ve been very critical of the bailout terms so that creates this expectation that they’re going to renounce the bailout terms. This could lead to the Greek exit from the Euro…but what’s almost certain to happen here is that it’s easy to take extreme positions when you’re not running the country, it’s harder to say ‘we’re going to inflict all this pain on Greece just to fulfill our campaign promises.” Newman believes it’s very unlikely that a Greek exit will be the outcome of these elections, but it will be quite a while before we know.
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