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Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with interest rates.

Inflation is coming down. Core CPI is down to 4.35% in August and the data for September is coming out very soon. If you look at the chart on your screen, you can see that the impact of the Fed’s moves is taking effect and hopefully, we will see annualized inflation down to 3% or less very soon.

So why are interest rates continuing to go up?  In fact, rates have been moving higher and higher for several months in a row, almost every single day.  Whether it be short-term rates, long-term rates, Treasury rates, or mortgage rates, the entire rate stack is moving higher.

It’s all due to the statements and policy moves by the Federal Reserve.  They have continued to message higher for longer and while the market and the Fed acknowledge inflation is coming down, the very strong jobs market creates a lot of doubt as to whether the Fed will reverse course on rates in 2024.  The market currently estimates the Fed will start lowering rates at the end of 2024 vs. just a few months ago when the belief was that the reversal would start mid-2024.

There’s been a long belief that these policy moves by the Fed would have already had a huge impact on the jobs market. But the market is much more resilient than most had predicted and that means the Fed’s fight against inflation will likely take longer. Take a look at the unemployment data on your screen; as you can see there does not yet appear to be any impact of the Fed’s policy adjustments so far.

That’s it everyone from the capital markets desk this week.  Thank you all for watching and have a great day.