Monday Mortgage Minute – So Inflation may be entrenched

We got what we expected last week! The Fed announced their most recent rate hike of 0.25%. That’s exactly what everyone was expecting, but the market was way more interested in what Jerome Powell had to say about the overall economic outlook than the decision itself.

During the press conference, he hinted at a few new things that could be quite telling about the future of the Fed’s rate hike decisions.

#1 he mentioned that they are beginning to see disinflation in a few sectors, but not in as many as they need to, in order to know that the full impact of their rate decisions are taking place.

#2 he made reference to the Fed’s terminal rate being at or slightly above the 5% target as their continued effort to bring inflation back to their target of 2.0%.

#3…Jerome mentioned a few times that they need “substantially more evidence” before making a change in policy direction (which is short for stopping the increases, and considering future decreases)

…so the question I’m asking myself is…what are they waiting for? Because this is kind of a continued admission that it’s taking way longer than they thought. Which is evidenced by this follow up doozy Jerome dropped when he said they’re concerned that the longer inflation remains, the higher the chance it becomes entrenched.

So which one is it? Are we moving towards a 2% inflation target or are we worried it’s gonna get entrenched?…both can’t happen as they are in direct contrast to one another.

Their next meeting isn’t until March 22 so we have quite a ways to wait until we get another crack at hearing their insight and perspective about where this is all really going. Nonetheless, it turns out this first quarter of the new year will prove quite pivotal in our direction economically.

With that, let’s take a look at what’s in store for us this week:

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Tuesday Jerome Powell speaks at the economic club of Washington D.C. and I would expect that this will be a lot of the same things he just mentioned at his last press conference. There’s no upside for him to announce anything NEW here, when he could have said it when it really mattered…from the podium.

On Wednesday Fed Member John Williams will take part in an interview at the Wall Street Journal’s CFO Network Summit. Don’t expect anything earthshattering here, because once again….Anything monumental should have already been stated from the podium last week during the Fed Press Conference.

Then on Thursday we will see unemployment claims. Unemployment has ebbed and flowed month after month, and the most recent round of tech layoffs will hit this number in waves over the next few weeks and months, so although the announcement of laying off tens of thousands of workers seems big, the rate at which all those workers get in the unemployment line, is completely up to them…The numbers will reflect that.

Lastly, on Friday we get the Preliminary Consumer Sentiment which has been getting better, but compared to the other data that we need to see fundamental change in, this isn’t really a heavy-weight right now.

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So what’s all this mean for mortgage rates?

Mortgage rates initially trended down when the Fed Press Conference happened last week, but then the market took back all that by the time Friday rolled around. So while many would like to scream from the mountaintops “rates dropped”…the truth is they fluctuated.

They DID drop, and then bounced back some. So once again, here I am advocating that PREPARATION is king. Moving forward it will be imperative that you stay very close to your loan office and the market, especially as the Fed needs “substantially more evidence”…still…

Like I said last week, Days on Market are going up, listings are having to compete with one another to vy for buyers interest and offers. Sellers are issuing concessions in a variety of ways like closings costs, 2-1 buy down, and other benefits for a buyer choosing their home.

There’s a LOT less buyer competition in this market, and if inventory holds steady, there will be slim pickings, but also less fighting over homes.

Lastly, if you find yourself in a tough spot and you already own a home, reach out to us before the situation is un-fixable. There’s a lot we can do BEFORE financial hardship completely takes root, so if you are privately in that situation and need someone to talk to, reach out to your loan officer, send us a DM, text or email us so we can help you out.

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