Waiting On the Fed

Interest rates have moved a bit higher in early morning trading as investors continue to digest last Friday’s Personal Consumption Expenditures (PCE) report that showed consumer inflation still has a long way to fall.

This week is also one filled with important reports, including a rate hike announcement from the Federal Reserve on Wednesday. It seems a sure bet that we will get another ¾%. However, the markets will be listening for clues as to what we can expect as a hike in December as well – as if the Fed is starting to think about an upcoming “Pivot.”

The first step to a Fed pivot will be a slowdown in the pace of rate hikes, which could happen as soon as December if the Fed chooses to only raise by ½.

Next, the Fed will “Pause” and choose to hold rates steady, which could happen as early as February 1st. Since the bond market prices in future movements, we would expect to see mortgage rates rally on the “belief” of a stop to what has been the most painful series of rate hikes in decades.

This is also Jobs Week, where we will get APD’s estimate of new job creations for the month of October on Wednesday, with the more significant report from the Bureau of Labor Statistics releasing their estimate on Friday.

This is always a market-moving report, but especially in recent months. With the Fed determined to slow the pace of the labor market with higher interest rates, hopefully this month’s report will reflect progress. For our economy to get inflation down at a more reasonable pace, we need to add some slack to the labor market which will unfortunately put more people out of work.

After failing to drop below a floor of support, mortgage rates have increased over the past few days. We will maintain a locking bias.