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Great News About Rates

Happy Thursday - I hope you are doing well. The FED met yesterday and it looks like rates should continue to go down from here. Rates are currently in the low to mid 6’s and trending lower. If you are able to buy a home, now is the time. As we head into the holidays, competition is still slower but this won’t be the case once we head into next year. Please see below for a recap of the fed meeting and let us know what we can do to help.

Fed Meeting Breakdown From ​MBS Highway

The Fed pivoted at yesterday’s meeting, completely changing their tone and signaling rate cuts next year. The Fed sounded much more dovish, saying that meaningful progress on inflation has been made and downgrading their view of the economy. Powell outright said that the Fed will not be waiting for inflation to reach their target before cutting and would do so well in advance of it to account for the lags.

When asked what inflation would have to be for the Fed to cut, he did not commit, but it seems to us if we see it get under 3% that the Fed would give the green light to cut. The Fed is finally starting to look a bit into the future, which is a good thing. Unlike previous talks, Powell did not try to downplay the market’s expectations of cuts next year.

When asked about the balance sheet, he said that the Fed is not thinking about stopping QT (balance sheet reduction) right now but left the door open if things slow. He explained that if it’s just to normalize policy, the Fed could wait. But if we see a few bad jobs numbers, the economy slows, etc, they would like to begin tapering or slowing the reduction.

The Fed’s Dots plot chart, which shows anonymously where the 19 Fed members believe the Fed Funds Rate will be over the next few years, was telling. There were a few outliers, with two members thinking that there would be zero cuts next year, while one member is pricing in 150bp of cuts. The vast majority believes the Fed will cut by 50 to 100bp, with the median Fed Funds rate at 4.6%.

One thing that could cause the Fed to be more aggressive is the unemployment rate. Most Fed members don’t see the unemployment rate getting higher than 4.1%, so that will be a key level to watch. If it gets higher than, many members will likely be surprised, and the Fed could do more aggressive cutting.

Stewart Sadler

Managing Partner

Cornerstone Mortgage Group


Georgia Residential Mortgage Licensee: 21412 • Company NMLS: 147913 • Individual NMLS: 147938

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