A History Lesson from the 80’s

Mortgage interest rates are again under pressure, as markets brace ahead of today’s Fed Meeting Minutes and tomorrow’s Consumer Price Index report.

Unfortunately, mortgage rates will likely push higher in the face of what is anticipated to be another report showing that consumer inflation remains elevated.

We further expect this report to support the Federal Reserve’s case to push another 75 basis point hike when they meet next in early November.

Global economies are once again flashing warning signs as the Bank of England continues to prop up their bond market to prevent pension funds from collapsing.

In spite of this, Fed President Powell remains committed to the course of raising short-term interest rates until we have seen a meaningful drop in consumer inflation. His fear of an easy “Fed Pivot” stems from the early 1980’s when then Fed President, Paul Volcker, paused his successive rate hikes only to see inflation surge higher.

With Powell learning from past mistakes, we can expect the Fed to add an additional 1.25% or so to the Fed Funds rate between now and the end of the year, and then possibly pause and wait to see the impact these additional rate hikes will have.

We remain in a strong upward-trending mortgage rate market. Not to sound like a broken record, but we will maintain a locking bias. 

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