Rate Watch 08/08/2022

By
Mortgage and Lending with Finance Of America NMLS #311662

Last Friday’s unemployment report came in much stronger than expected (although I think part-time jobs had a big effect). It more than doubled expectations! Those wishing for lower rates were stung by this data as it provides gunpowder for the Fed to increase them.

 

It will also help support the argument that we are not in a “true” recession as most recessions had high unemployment rates. The unemployment rate fell back to pre-pandemic levels.

 

This week is another important one. We get our CPI numbers. As important as the unemployment numbers are when it comes to current Fed monetary policy, the CPI takes the cake.

 

Last month came in at 9.1%. If this week comes in at or below that figure, we should see a nice relief in rates. It will signal a possible peak in inflation, which has been running rampantly for over a year. The market will interpret this as a trend reversal has begun and will place their bets accordingly.

 

For what it’s worth, this coming CPI report is the first time that I think has a chance to show a month-over-month decrease.

 

Whatever the result, the Fed will have this August CPI and September CPI reports/data before their next monetary policy decision at the end of  September. This month they will be doing their annual meeting at Jackson Hole.

 

The Week Ahead

 

Monday

 

  • NY Fed 3 Year Inflation Expectations

 

Wednesday

 

  • CPI Data

 

Thursday

 

  • Initial and Continuing Jobless Claims
  • Producer Price Index

 

Friday

 

  • 5 Year Inflation Expectations

 

Chart Check(see above)

 

We were close to touching the upper resistance line but fell short. We have an ascending horizontal wedge pattern and it seems we are looking to break out of it shortly. Wednesday’s CPI report has the potential to be the catalyst for the next move.

 

 

I mentioned last Sunday that it was too early to pop the champagne. We’re coming off the heels of a bad week but anything is in the cards now as we wait for Wednesday.

 

The best case scenario is that August and September CPI show a declining trend take place and Fed raises rates a maximum of 50bps in September. If those things happen, we will see a favorable year-end rally. The Fed will just need to be careful to cut rates without sparking an increase in consumer demand.

 

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

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 (1)

Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Matt and Thank You for the great information to share with us here in the Rain.  Make it a great week!

 

Aug 08, 2022 10:25 AM