The Economy: Mixed Signals and a Look Ahead

The Economy: Mixed Signals and a Look Ahead

This month has been anything but thrilling in the world of the Federal Reserve. (That is sarcasm, by the way.)
The Federal Open Market Committee (FOMC) meetings are pivotal for shaping our economic landscape. They determine the direction of monetary policy, which in turn impacts interest rates, inflation, and overall economic growth.
Last month, inflation was described as “slowing,” and this month, it remains in the same trajectory. This gradual deceleration has been deemed significant enough that Jerome Powell has suggested that rate cuts are on the table for September’s meeting. Futures markets currently indicate a 60% chance of further rate reductions in November, with similar odds for potential improvements around the holiday season.
Despite the possibility of a rate cut being on the table for September, Powell emphasized that any Fed actions will depend on whether inflation remains controlled and if the economy stays relatively stable throughout the year.
With the hint of a rate cut right before the U.S. presidential election, there is a question of whether the Fed can maintain its apolitical stance. For the health of our economy, it is crucial that the Fed adheres to its commitment of avoiding political influence. If political motives were behind an early rate cut, the current struggles with inflation and tight budgets could persist longer than necessary.
I apologize for the slight delay in this update, but it was worth the wait! As the saying goes, “Bonds continue to rally.” One of my sources recently noted, “The US 10-Year Treasury yield is at 4.021%, just below the open at 4.055%. We could soon see a 3-handle 10-year yield, a level not seen since late January.” For those unfamiliar with the term, a “3-handle 10-year yield” simply means the 10-year Treasury bond yield begins with a 3—like 3.25%, 3.78%, or 3.01%.

Why is this important?
The 10-year Treasury yield is closely monitored by investors as it often serves as a benchmark for interest rates across the economy.

What does it impact?
Stock Market: Higher yields can exert downward pressure on stock prices as investors may shift their money from stocks to bonds.

Mortgage Rates: Mortgage rates generally move in line with Treasury yields, so a higher 10- year yield can lead to increased mortgage rates.

Economic Outlook: The shape of the yield curve can offer insights into economic growth expectations.

From what we just discussed the Fed’s actions, and the movement of Treasury yields are critical indicators of broader economic trends. For real estate investors and homebuyers, keeping an eye on these developments is essential. Understanding how interest rates and inflation influence the market can help you make informed decisions in a fluctuating economic environment.

Contribution By our Lending Partners @ American Pacific Mortgage Corporation:

Levi Pollack | Mortgage Loan Originator

NMLS: 1749086 | NMLS: 1850 | Licensed in, CO, MA, PA, MI

p 720.454.6331| f 719.466.2198

[email protected]