Rate Watch - Almost Half Time For 2022

By
Mortgage and Lending with Finance Of America NMLS #311662

 

 

The Fed has become more hawkish in its public stances. I said in an earlier newsletter that “soft landing” is for 2022 as “transitory” was for 2021. All made up for our entertainment.

 

The expectation for July used to be a 50bp hike. After the latest inflation report and hearing from the Fed members, I believe it will be more of a 75-100bp hike. There is no Fed meeting in August (they have their annual meeting at Jackson Hole) and will reconvene in September.

 

Inflation is the story at hand. Until the CPI numbers (the most important report these days) show a month-over-month decrease, expect the same trend to continue. Rates may continue to increase in the short term, but unlike in the 1980s, it is unsustainable. The amount of US debt the Fed holds (and pays interest on), the record number of zombie (can’t afford interest payments on debt) companies existing today, the negative (-1.4%) GDP growth, and the way the global economy is connected, won’t allow for high-interest rates without a recession.

 

If a true recession ever comes to the table, the Fed will cut rates faster than they increased them. They will also provide plenty of stimulus. We’ve seen these moves during the good times – I expect to see them accelerated during the tough times.

 

Here is what is in store for this week

 

Monday

 

  • Pending Home Sales Index

 

Tuesday

 

  • Richmond Fed President Tom Barkin Speaks
  • US Home Prices YOY
  • Consumer Confidence Index
  • San Francisco Fed President Mary Daly Speaks

 

Wednesday

 

  • Fed Chairman Powell speaks with ECB President Lagarde at ECB conference
  • Cleveland Fed President Loretta Mester speaks at ECB conference
  • St. Louis Fed President Bullard speaks

 

Thursday

 

  • PCE Inflation Numbers
  • Initial and Continuing Jobless Claims

 

 

Chart Check (see above)

 

 

For this Chart Check, what I want to point out is something I’ve noticed during the days before the Fed Rate hikes, and it occurred during this past one too.

 

The Fed meeting is always on Wednesday. The week opens up with a  bond market sell-off in anticipation of the Fed increasing rates. Then that gets priced in so when it actually occurs on Wednesday, there is no negative reaction.

 

Instead, the market cares more about Powell’s speech – which is usually dovish, and with hesitancy during any aggressive stances. The market usually rejoices, sending rates down for a day or two.

 

 

I’m not saying that is going to happen every time, but it has so far. Something to keep an eye out for and to talk to our clients about.

 

The ECB meeting is this week and I know England (along with Europe) has seen record inflation. The problem is if the ECB cuts rates, while the US increases them, then we face issues of currency wars that will impact import/export global trade. This, however, is a deep discussion for another time.

 

Click HERE to stay current with the Fed’s meetings this year. You can also view the statements and minutes from previous meetings.

 

That’s it for this week. As always, reach out anytime with questions, comments or debatable conversations. I’m always here!

Posted by

Matt Brady

Builder Sales Manager, NMLS ID#311662

(858)342-8659 cell |844-268-1952 fax

mabrady@financeofamerica.comfamadvisor.com/matthewbrady   
8885 Rio San Diego Dr │ Suite 201  San Diego, CA 92108     

 

BIA SanDiego 19 year Member and P2 Sponsor

 

BIA SMCBoard Member since 2012

 

 

 

 

Comments (3)

Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Great information. Thanks for sharing and have a wonderful day! bill

Jun 27, 2022 09:30 AM
Dave Halpern
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

It doesn't matter what the experts think or say. No one knows.

In addition, there are negative forces on the market and on the economy that didn't exist in the 2008 crash. We have runaway inflation caused by the administration's war on oil. Mismanagement of the supply chain is also contributing to shortages and rising prices. The Feds are raising interest rates to fight inflation that has been self-inflicted by bad policy. Changes to the war on oil policy would lower inflation without destroying the economy like the rising interest rates will.

Gas prices and the highest inflation in decades are snatching many hundreds of dollars each month out of the pockets of Americans. Many have overpaid for homes in the last two years and their mortgage payment budget did not factor in doubling and maybe tripling of gas prices, did not factor in rampant inflation, and did not factor in rapid increase in interest rates that will reduce the buying power of home buyers in case the sellers have to sell.

The housing market is more fragile than the media wants to report.

Jun 27, 2022 07:48 PM
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Matt Brady - you are a treasure! Minds like yours are not appreciated as much as they should be. You provide guidance and education. Thank you. 

Jun 29, 2022 01:48 PM