Rate hike then a PAUSE – Could this be the end?

Mortgage rates were pretty neutral last week which is what we expected because it was the week leading up to what we call Fed week. That brings us to today – the week where we expect to hear from Jerome Powell about their interest rate decision, any changes to monetary policy, and then watch his Q&A session with the press afterwards. It is typical that in the week leading up to this particular week that mortgage rates are rather subdued because the markets are aware that any major move for the better or for the worse would be made on the eve of Fed week. Thus there is little sense to make wild adjustments in the days leading up to a fed decision like the one we will get this week.  For those of you that were looking to lock a loan this week Wednesday is potentially going to be the most volatile day of the week due to the Fed press conference and what they say about the state of inflation, the economy, the jobs market, whether or not this is their last rate hike, and if they provide any hints or clues about the timing of achieving their goals relative to how long it has taken to even get this far.

What I’m looking for on Wednesday is a quarter percent interest rate hike as well as a semi obvious tell that the Fed is going to pause any future rate hikes in exchange for more data collection over the next few months. This should allow them to more accurately measure whether their moves over the last year and a half have finally done enough to accomplish their stated outcomes of 2% inflation, restoring price stability, and tightening the labor market sometime in 2024 or 2025.  There’s still a lot of mixed opinions on whether or not the Fed will start cutting rates later this year, which I spoke about in last weeks episode, so go back and catch that if you missed it. If cuts were to happen, then all the data and charts they’ve been showing us this year would be rendered SO incorrect that I could easily justify never trusting them again moving forward. All this to say, some things are just not adding up. So this is where we find ourselves coming into this new week where the only way to get through it, it to go through it.

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And here’s a quick look at what’s coming up in the markets this week – And remember most, if not all of this is already known by the Fed coming into their policy statement and press conference Wednesday.

Monday: The Flash Manufacturing AND Flash Services PMI both come out.

Tuesday:  Consumer Confidence reading will be released.

Wednesday: Before the Federal Reserve fireworks we will see New Home Sales, which are forecast to be right at their current levels just above 700,000 units. And there’s no surprise here because new homebuilder sentiment and permits have both been up and on the rebound for quite some time. So this is the positive consequence of those moves having been made upstream a few steps. Hopefully this will continue to drive inventory to neighborhoods and eventually ease these shortages…we’ll see.

And then Jerome Powell will deliver the Fed’s rate decision, prepared remarks and take Q&A with the Press. We’re all expecting him to announce a quarter percent rate hike, and I would be surprised if he announces that it’s the final one. Based on his previous comments explaining that they need to remain data dependent and let their moves up to this point take their full effect, don’t hold your breath waiting for him to admit they’re finished…they keep telling us they’re nearing “wait-and-see” status.

The fun doesn’t stop on Wednesday because Thursday we get advanced GDP, unemployment claims, some durable goods data, and pending home sales.  All of which will mostly fall in line with the Fed’s remarks and posture on the previous day, or maybe even be cast into the shadows all together.

And finally on Friday we get he CORE PCE month over month, employment cost index and the revised consumer sentiment….this could have the potential to rock the boat at the end of the week, but that all depends on how much Jerome knows BEFORE Wednesday, decides to admit that he knows on Wednesday, and then whether they let the cat outta the bag by revealing any of these readings before are made official. Friday could actually be pretty telling when it’s all said and done.

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