Reasons for the Fed to Slow Rate Hike Pace

Global pains are once again on the forefront of financial headlines this morning after the United Nations called on the Federal Reserve and other Central Banks to halt future interest rate hikes to help prevent a global recession that will disproportionately harm more vulnerable nations.

The reality is that that interest rate hikes take time before their full impact is felt throughout the economy. If the Federal Reserve continues to drive the Fed Funds rate higher until the desired results are in place, they will have overshot what was needed to achieve the target goals.

It’s Jobs Week, with ADP slated to announce their estimate of new job creations for the month of September tomorrow, and the Bureau of Labor Statistics (BLS) reporting on Friday. The more important BLS report is expected to show that there were 250,000 jobs created.

If the report happens to show the labor force not growing as quickly as anticipated, this will help support the cause for the Fed to slow the pace of expected rate hikes. This would also help support lower mortgage interest rates in the near term.

The past couple of days have been good for the mortgage market, with quoted rates for City Creek falling from a high of 6.5% last week down to the current 5.99% today.

This could help inspire some to feel more comfortable buying a home, as lower mortgage rates would help support home values going forward.

With rates improving, we will maintain a floating bias. However, we need to remain mindful of the potential pullback.