Although these are promising signs, it is just from one CPI report. The Fed wants to fight inflation aggressively before the economic cracks begin to surface and conquer mainstream media. If they can juice rates up for a few more months before we get lackluster jobs reports then they will be able to control the narrative. If inflation and unemployment run rampant, that is where things get tough.
Should this happen they will choose to cut rates to fight a recession rather than raise them to fight inflation. Then, due to increasing prices (effects of inflation), they will provide PLENTY of stimulus (increase monetary supply aka create inflation) to make the layman happy enough to not rebel.
We get unemployment numbers on December 16th, so keep that on your radar. With Meta’s recent 11,000 employee layoff the jobs outlook continues to dim.
Here is what we have this week
- NY Fed 1 and 5 yr Inflation Expectations
- PPI Data
- Real Household Debt
- Retail Sales
- NAHB Home Builders’ Index
- Initial and Continuing Jobless Claims
- Building Permits
- Housing Starts
Chart Check (SEE ABOVE)
Taking a look at the 10yr US Treasury (moves in tandem with mortgage rates) we see things playing out exactly as described last week. We crossed below the support trendline, retested it, and bounced lower. I can see us retesting the late September/early October levels as that is where we can see some level (nothing strong) of support. If so, we will have better rates in the short term.