03/20/2026
Fed leaves rates the same, EU Rate hikes being considered. Mortgage rates up in US by 0.375% in the past three weeks.
Stocks and Bonds are both sharply lower this morning, on news out of the European Central Bank and Bank of England that both central banks are ready to hike rates as soon as the end of April if the war in Iran pushes inflation too far about their targets. As a result, yields across the globe, including our 10-year, are rising.
There were also comments from Fed Governor Waller, who has been one of the most dovish Fed members. He decided to not vote for a cut at the last meeting, because he is concerned about the oil situation as well. He explained that if oil prices go up and then come down, the price shocks can be looked through. But this situation is looking more and more like oil prices could be elevated for a prolonged period, which could then bleed through into prices and that caution is warranted. He does feel that structural inflation has come down. The inflation level last year and this year are very similar, with what he estimates to be about 0.5% impact from the tariffs, which he feels will fall off after Q2.
On the labor market: He has been sounding the alarm on the weakness, but said that the latest data shows that the labor force may not be growing at all, which means that zero job creations on average could be the breakeven and not cause the unemployment rate to rise. But he did say that if the March Jobs Report is similar to February, showing big job losses, then on average there would be job losses and the Fed would need to step in. He also thinks this would stoke recessionary fears, which are not helped by higher oil prices either. Waller finished by saying that he may be in favor of cutting rates later this year, but wants to see what happens in the near term with oil prices and the next employment report. Waller's comments, which were less dovish than he had previously been, also weighed on the Bond market this morning.
