Fed Cuts Rate: What’s Next - Sept 23 - Weekly Mortgage Update
The Federal Reserve’s unexpected 0.50% rate cut opens opportunities for lower loans while highlighting economic concerns, with projections and upcoming meetings suggesting continued financial changes.
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📊 Market Update
The Federal Reserve made a big splash this week by cutting interest rates by 0.50%. This was more than many experts expected.
Lower interest rates can mean cheaper loans for things like houses and cars. But it's not all good news - the Fed's move shows they're worried about the economy slowing down.
What's Next for Interest Rates?
When the Federal Reserve (the Fed) makes decisions about interest rates, they don't just think about today - they're looking into the future too. Let's break down what they're expecting:
2024: Rates Coming Down The Fed thinks interest rates will be around 4.4% by the end of 2024. That's lower than where we are now
2025: Even Lower By 2025, they're projecting rates to drop to 3.4%. This is a pretty big drop! If this happens, you will see much better deals on mortgages and other loans.
2026 and Beyond: Settling In The Fed expects rates to land at 2.9% in 2026 and stay there in 2027. This is what they call the "long-term" rate.
Now, here's the tricky part: these projections are more of an educated guess than a guarantee.
The economy is like a giant jigsaw puzzle with pieces that keep changing shape. Things like global events, new technologies, or shifts in consumer behavior can throw these predictions off course.
While the Fed has some of the brightest economic minds making these forecasts, they're not fortune tellers. It's entirely possible that rates could end up higher or lower than predicted.
Buy the Rumor, Sell the News
Let’s get nerdy for a second. 🤓
You’ve probably heard the phrase “buy the rumor, sell the news.” It’s when traders start making moves before an announcement, and once the news drops, they do the opposite.
Well, this week was the perfect example. Bond yields were at their lowest point before the Fed cut, and as soon as the 50 basis point cut announcement hit, traders started selling, pushing yields higher.
Higher yields puts upward pressure on mortgage interest rates.
While the rates are still low, but we’re in a phase where any new data could stir the pot.
Two More Fed Meetings in 2024
As we say goodbye to September’s Fed meeting, we’re already looking ahead to the next big dates:
November 6-7
December 17-18
With the holidays just around the corner, the financial world is eagerly waiting to see if the Fed has a little surprise gift in store for us—could lower rates be the perfect present?
It’s been a long year of high rates, but with inflation slowly creeping closer to the Fed’s 2% target, there’s a glimmer of hope that the Fed could leave us all feeling a bit more cheerful. After all, who wouldn’t want an early gift that brings some relief to mortgage rates and borrowing costs?
It’s like waiting to see if that one big present under the tree is exactly what you’ve been wishing for.
So, as we get closer to the next FOMC meetings, keep your wish list ready and stay tuned—because if the Fed delivers a rate cut, it might just feel like the best holiday gift you didn’t even know you needed.
Later This Week
This week starts with Fed speeches, followed by housing market data midweek. Thursday is the busiest day, with reports on employment, inflation, GDP, and more Powell and Yellen.
Monday, 23
Fed Bostic: Speech by Federal Reserve Bank of Atlanta President Raphael Bostic
Fed Kashkari: Speech by Federal Reserve Bank of Minneapolis President Neel Kashkari
Wednesday, 25
Building permits: A measure of new construction in the residential housing market
New home sales: Data on sales of newly constructed homes
Thursday, 26
Jobless claims: Weekly report on the number of people filing for unemployment benefits
Core PCE prices: Personal Consumption Expenditures excluding food and energy, a key inflation indicator
GDP: Gross Domestic Product, measuring overall economic output
Powell + Yellen: Speeches or testimonies by Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen
Pending sales: An indicator of future home sales based on contract signings
Friday, 27
Core PCE index: Another measure of Personal Consumption Expenditures excluding volatile components
PCE price index: Overall Personal Consumption Expenditures, including all categories
Retail spending: Data on consumer spending at retail establishments