Mortgage Rates & the Fed
The day is here. The markets anticipate the Federal Reserve Open Market Committee (FOMC) to announce another 1/2 point cut in their Overnight Rate this afternoon. This anticipated cut comes right on the heels of the surprise 3/4 point cut last week.
The general media will report "Fed Cuts Rates" and lead many people to believe that mortgage rates also went down.
Will mortgage rates go lower? We will have to see.
What will drive mortgage rates lower from here is the bond market's interpretation of what the Fed does AND says in their policy statement. If they make remarks that are cautious about inflation don't expect mortgage rates to get better. However, if they indicate further economic slowdown is ahead that will open the door up for lower mortgage rates in the coming weeks.
Big point here. Mortgage rates will most likely hit the lows of the year in the coming 4-5 weeks. If you think we will see lower mortgage rates later this year ask yourself why? Mortgage rates are determined by inflation pressures. When you are out and about do things seem to cost you more everyday?
Inflation is in the economy and the FOMC is lowering rates to spur economic growth while taking their focus off of fighting inflation. Mortgage rates will rise later in the year as the FOMC has to switch gears from economic stimulus to inflation fighting.
Let's see how the market reacts to what the Fed does & says this afternoon. I'll be back with analysis later today.
Comments