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The Path to Lower Rates Has Begun

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

In case you haven’t been watching, a lot has happened this past week. We saw a weak ADP employment report, a Federal Open Market Committee (FOMC) meeting with no change to the benchmark rate, which likely meant a very boring jobs report on Friday.

That was definitely not the case and the market got a huge shock with a very weak jobs report that showed only 114,000 jobs added to the economy in July and the unemployment rate jumped up to 4.3% from 4.1% in June.

That sent markets into chaos with investors rushing into bonds and out of equities with the fear that the economy was headed for a recession and the FOMC is acting too slow and too late to stop it.

Now here we are this week with the 10-year yield down nearly 30 basic points since last Monday and a market trying to determine if this latest job’s report is the canary in the coal mine or just a one-off bad month.

Jerome Powell has tried to calm markets by stating that the unemployment rate is still very low overall and the risk of continued inflation is about balanced with the risk of a recession. That certainly is not the market’s interpretation with expectations now that the Fed will lower rates more than 1% before the end of the year.

If the market is getting ahead of itself or not remains to be seen; but one thing is for sure and that is that the likelihood of lower rates for the foreseeable future is extremely high. 

Both the next inflation report that comes out on August 30^th, along with the next jobs report which is due to be released on September 6^th will be the most closely watched days of 2024.

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