"We will use our tools as appropriate to sustain the expansion. Participants (Fed members) expressed concerns a about a more sustained shortfall of inflation," said Fed Chair Powell at his press conference yesterday. Mr. Powell went on to say that Fed members cited weaker business investment and cross currents as reasons for seeing cuts. In addition, the Fed chair said inflation is coming to target more slowly than expected while rising wages are not providing an upward push on inflation. The Fed left the benchmark Fed Funds Rate unchanged at this week's Fed meeting.
The takeaway: a cut to the Fed Funds Rate is essentially guaranteed in July while there is a third of a chance of a .50% cut!!! The statement and Powell's words sent mortgage bonds, treasuries and stocks soaring higher. The S&P 500 is at fresh all-time highs. The all-time closing high for the S&P is 2,945.83, hit back on April 30 before the May sell-off. The 10-year T Note yield dipped below 2% this morning to 1.97% before rising to the current level of 2.01%.
Mortgage rates inched higher this week though remain at the lows seen in September 2017. Freddie Mac reports that the 30-year fixed-rate mortgage rose just two basis points to 3.84% with an average 0.6 in points and fees. Sam Khater, Freddie Mac’s chief economist, says, “While the continued drop in mortgage rates has paused, homebuyer demand has not. Today’s low rates, strong job market, solid wage growth and consumer confidence are typically important drivers of home sales.”
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