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How will the Feds help Inflation by hiking rates? it won't, seriously.

I know I’ve said this before, but it’s worth repeating because it’s fundamental to understanding where mortgage rates are headed. The Federal Reserve’s primary tool for fighting inflation is the Federal Funds Rate. By raising this rate, the Fed makes borrowing more expensive throughout the economy. It affects businesses looking to borrow money to expand, invest in new equipment, or hire…

An Interesting thing Happens when you Turn Off your Transponder.

Much of the oil that once moved through the Persian Gulf before the conflict is still reaching global markets, but through different channels. Over two-thirds of pre war oil. Some tankers are operating with their transponders turned off, making it more difficult to track shipments. In addition, approximately 7 million barrels per day are being transported via Saudi Arabia’s East-West Pipeline to…

What is "Demand Destruction and Recession"

My Friday morning thoughts. When the economy is growing quickly, consumers generally have more money to spend. If demand for goods and services is stronger than the available supply, businesses can raise prices because people are willing to pay more. That’s inflation. To cool things down, the Federal Reserve raises interest rates. Higher rates make borrowing more expensive, not only for…

Saber Rattling is making everyone nervous. Oil up $80/barrel

Market Update The geopolitical standoff continues, and the threat of a broader regional conflict remains serious. Iran has warned that the Strait of Hormuz is a non-negotiable red line and has stated it would target oil infrastructure throughout the region, including neighboring countries, if the U.S. were to carry out attacks on Iranian power plants or bridges. If tensions escalate, oil prices…

CPI Fell 0.4%. Inflation drop 4.2% to 3.5% in June. Let's take a trip in the way-back Machine

Earlier this year, oil was trading below $60 a barrel, inflation was running near 2.4%, and conventional mortgage rates dipped below 6%, the lowest levels we’d seen in quite some time. Just a few months later, the picture looked very different. Oil prices surged, inflation moved higher, and conventional mortgage rates climbed back toward 7%. A major driver of that volatility has been the…

New Housing Bill: What It Could Mean for Homebuyers

This is good news for future home buyers and first time home buyers. Now we just need rates to cooperate. More housing supply: The bill is designed to encourage the construction of more homes to help address the nationwide housing shortage. Faster development: It includes measures to streamline permitting and reduce barriers that can delay new housing projects. Support for affordable housing:…

Podcast Episode: Fed Policy And Market Signals

Pip: Mortgage rates, Fed minutes, oil prices, and a Fed chair who apparently has to talk the board out of hiking rates — welcome to the bond market's version of a group project where nobody agrees on the deadline.Mara: Today we're working through posts from Jackkammer covering two connected territories: where the Fed actually stands on rates, and what falling oil prices are and aren't doing to…

#economy #federal-reserve #finance #inflation #investing

PCE new Math starts in September. It's about time and this is Huge.

A Potentially Big Change in How Inflation Is Measured The U.S. Bureau of Economic Analysis (BEA) is changing how the Personal Consumption Expenditures (PCE) index measures certain components of inflation. Why does this matter? Sometimes what looks like inflation really isn’t. Here’s an example: Imagine you have a financial advisor who charges a fee of 1% of your investment portfolio. If the…

Fed Bifurcated. It's a good thing

Market Update The Fed minutes from the June 17 meeting showed policymakers are nearly split down the middle on the path for interest rates. Eight members favored no rate cuts this year, one favored a single cut, and nine projected one rate hike. Most Fed members also expect inflation to continue easing as oil prices decline and the impact of tariffs diminishes. Translation: The inflationary…

Feds Favorite Drug? Rate Hikes! but Warsh is taking it away.

Oil prices have retraced 98% of their recent increase, but gasoline prices have only fallen back about 46%, and the bond market has recovered just 30%. Gasoline prices tend to rise almost immediately when oil prices increase, but they usually take much longer to come back down. That should begin to improve as OPEC+ has announced plans to increase production. My take: These developments are…

Thanks Beth (Debbie Downer)

Fed voting member Beth Hammack had me scratching my head this week. First, higher oil prices contribute to inflation… fair enough. Then came the twist: lower oil prices could also cause inflation because consumers would have more money left over to spend. So… higher oil prices are inflationary, and lower oil prices are inflationary? Sometimes it feels like the Fed’s answer is, “No matter what…

WSJ Article, Did they Lie about Borrower Rates? Yes, Higher rate may be the right choice.

Mortgage rates are cyclical, a roller coaster ride. We’ve seen that firsthand over the last year. Not long ago, the national average 30-year mortgage rate was around 8%. Just a few months ago, it dipped to approximately 5.99%. Today, it’s sitting just under 6.5%. That’s a significant swing in a relatively short period of time. I recently came across a Wall Street Journal article claiming…

#credit-score #finance #home-buying #personal-finance #real-estate

Dallas Fed Trimmed mean Inflation 2.4% in May. Warsh Fav Benchmark

One of the biggest challenges in economics is making sure you’re watching the dog—not the tail. It’s easy to get caught up in the latest inflation headline, but the underlying trend often tells a very different story. That’s one reason the Dallas Fed publishes its Trimmed Mean Inflation measure. Rather than treating every price change equally, it removes the most extreme price movements, both…

PCE High for May but bond market shrugs. That's so yesterday...

The Personal Consumption Expenditures (PCE) Index, the Fed’s preferred measure of inflation, rose 0.4% in May as expected. On a year-over-year basis, inflation increased from 3.8% to 4.1%. At first glance, that’s not great news. However, much of this increase reflects the surge in oil prices we’ve experienced over the past several months. In many ways, the market has already priced this in. It’s…

$70 a Barrel, Rates follow slide down

Oil prices are now sitting around $70 per barrel this morning, a significant improvement from the recent highs and getting much closer to the pre-conflict levels near $56. Mortgage rates have improved as well, but not nearly as fast as oil prices have fallen. The reason? The Federal Reserve remains cautious. While lower energy prices are certainly helpful, policymakers are still concerned about…

Tech sector selloff. Mortgage Bonds rebounding (lower rates). Oil below $73 barrel

With continued progress toward a long-term U.S.–Iran peace agreement and reports that Iran has moved approximately 30 million barrels of oil back into global markets, financial markets are reacting in a rate-friendly manner. Oil prices have softened, Treasury yields have moved lower, and Mortgage Bonds have improved as investors begin to price in reduced geopolitical risk and lower inflationary…

Greenspan legacy @100. Oil prices down. The week ahead.

Our hats off to Alan Greenspan who passed away this weekend at the age of Our hats off to Alan Greenspan, who passed away this weekend at the age of 100. Greenspan was the second-longest-serving Federal Reserve Chair in history and guided the Fed through some of the most turbulent financial and geopolitical events of the modern era, including the Thai Baht crisis, the 1998 hedge fund bailout,…

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