09/19/2024
Capital Markets Recap from Yesterday
“This was the right thing for the economy and for the people we serve.”
Recap:
• Fed cut rates 50 basis points
• Fed sees unemployment ticking up and GDP degrading slightly
• Mortgage rates remained unchanged
• Was it what you expected?
Yesterday, in one of the most suspenseful Fed meetings ever, the FOMC voted 11 to 1 to lower the benchmark rate by 50 basis points. The first cut in over 4 years. The Dot Plot, or the rate projection chart, showed voters expect to lower rates by 1% by year end. Meaning, we could see two additional 25 basis point cuts this year.
JPow cautioned this type of jumbo cut is not going to be the norm going forward. The statement added language to say the committee is, “strongly committed to supporting maximum employment” in addition to returning inflation to the 2% goal. The statement added language to say, “in considering additional adjustments” to rates, officials will assess incoming data, evolving outlook and balance of risks.
The Fed also released a forecast for GDP, employment and inflation. Looking at their projections it explains the 50 bp cut.
• Slight downgrade to GDP: 2% from 2.1%
• A big jump in unemployment estimates: 4.4% from 4%
• A downgrade in core PCE: 2.6% to 2.8%
Looking out a little further the Fed sees inflation coming back to the 2% target by the end of next year.
Many economists, politicians and reports claimed this was a big victory for Jay Powell and the American Homeowner. Was it? What did rates do? Nothing. Rates remained unchanged throughout the entire afternoon. Remember, rates are forward facing. Meaning, this was priced in weeks ago. Hopefully, if you have a client floating waiting for a big 50 basis point drop in rates you call them and deliver the great and the good news. Great news, rates are the lowest they have been in over a year. Also, good news, you can still lock in a low rate today, so let’s do that!
