Rate Watch - The Fourth Quarter Is Here!

The Fed paused rate hikes, as the markets were expecting. The markets were hung up on Fed Chairman Powell's speech where he indicated that rates would be higher for longer than originally anticipated. 

The market originally priced in a rate cut in Q2 of next year but now they don't think there will be one until Q3 or Q4. 

I, however, think Powell had to be hawkish in tone to not get markets excited. He knows that he can create the market reaction he wants without actually doing anything to policy. 

The part of his speech that I was most excited about was when he said that the Fed can finally "proceed carefully" with its policy decisions. This means that they now have the ability to make decisions based on the data and how they view the economy. They couldn't do that before.

Before, inflation was running so rampantly out of control that they had no choice but to raise rates very quickly (the fastest pace in history). 

But the Fed now thinks they are in a healthy enough position to make decisions based on the data and how they see fit. They think the economy is in a good place and want to see the effect of the previous rate hikes before implementing anything new. 

I personally think the Fed is done with their hikes. I said in the summer that we should have 2 more hikes and this September one was the 2nd one. Although the Fed left a November hike on the table I have a feeling it will be another pause. 

Future inflation data and jobs data will help determine the Fed's next moves. 

Here is what's in store for this week

Monday

• Nothing Scheduled

• New Home Sales
• S&P Case Shiller Home Price Index
•  Consumer Confidence
• Fed Governor Bowman Speaks

• Durable Goods Orders

• Initial Jobless Claims 
• GDP Revision
• Fed Gov Cook Speaks
• Fed Chairman Powell Speaks

• Personal Income
• Personal Spending
• PCE Index (inflation: expect volatility with mortgage rates on this report)
• Advanced Retail & Wholesale Inventories
• Consumer Sentiment

Chart Check

We have been in a strong upward channel for the 10yr, which means that mortgage rates have climbed high since May. The chart looks poised to test the lower bounds of the channel, which could mean we see some relief soon. 
 

• Fed Gov Lisa Cook's Speech
• Home Sales Drop | Prices Up | Buyers Out
• Leading Economic Index Suggests "Brief & Mild Contraction"
• Strong Labor Data Increases Chance of Fed Rate Hike
• Fed Pauses Rate Hikes and can "Proceed Carefully"
• Housing Starts Plummet, but Permits Show Hope
• High Mortgage Rates Force Homebuilder Confidence into Negative Territory