Fed Changes Tune - Oct 24 - Weekly Mortgage Update
Fed's Mary Daly was the first to break this year's Fed tone with comments that now is the time to be thoughtful about over-tightening as we have started to see the economy slowing.
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â Check This Out
Responding to higher inflation, the IRS has raised the income thresholds for each tax bracket AND increased the standard deduction. 401k max contribution rises to $22,500. Cha-ching!
Need a rule of thumb for a cost-of-living pay raise in the next awkward performance review? Every 1% rate increase means earning ~$10,000 more annually to afford a median-priced home.
CoreLogic forecasts a deceleration in home price growth, with home prices rising 3.2% over the next 12 months. With the S&P down over 22% this year, Iâll gladly take any real estate appreciation, tyvm.
Social security monthly payouts will increase 8.7%, the biggest jump in 40 years.
This article considers both sides of buying a duplex. If you get that joke, we have so much in common.
đ Market Update
Last week may have been the time to mark the first change in tone from the Fed. Although not every Fed governor expressed the same sentiment, it was a welcome change of pace from this yearâs onslaught of pressure to slow demand to slow inflation.
Fedâs Mary Daly of the Federal Reserve Bank of San Francisco broke ranks by sharing her concerns on a more rate-friendly monetary policy.
âWe have to make sure we are doing everything in our power not to overtighten, and we can't pull up too fast, and say we are doneâŠthe time is now to start talking about stepping down.â
Mary Daly, Fed Governor
The goal is to avoid an unforced downturn by not overtightening. It would be easy to overtighten if we wait to see lagging indicators like unemployment (which has remained low) and inflation (which has remained high) return to a steady state. The economy is slowing, and we are now in a stage where the Fed needs to be thoughtful.
Volatile Bond Movement
On Friday, you could sense the bond market panicking. 10-year treasury yields, commonly used to gauge the trend in mortgage interest rates, broke the highest levels in over a decade. Coincidentally, this Wall Street Journal article was released at 8 am that morning, suggesting the rate hike increments would be up for discussion at the next meeting.
Like clockwork, the futures market received a massive influx of speculators which drove the yields back to around opening levels. Coincidence?
A 75 basis point increase is still expected at the next meeting on November 2nd, but investors are banking on additional insights into the pace of future hikes.
Later This Week
We will see New Home Sales released on Wednesday and a very important third-quarter GDP update on Thursday. Core PCE, the favored inflation measurement of the Fed, is scheduled for release on Friday. (Core PCE excludes food and energy)
Could we see a third consecutive decrease in GDP and solidify that we have been, in fact, in a recession? Or maybe the goalposts will be moved back yet again. No one knows for sure, but like every other week this year, weâll be in for another ride on the Powell train. đ