The Fed left interest rates unchanged yesterday, but the decision was not unanimous. For the first time in over 30 years, two Fed Governors dissented, voting instead to lower interest rates. In the press conference following the announcement of the rate decision, Jerome Powell did indicate that the FOMC understands they are being “restrictive” to slow the economy down. Given that the Personal Consumption Expenditures year-over-year figure rose 0.1% to 2.6% on the headline number and by the same amount to 2.8% on the core reading, it appears they made the right call. Don’t get me wrong. I’m all for lower interest rates! The next three months PCE year-over-year readings may be abnormally higher than what we are seeing today because a year ago the third quarter gave us very weak inflation data hovering around 1.7%.
Technically speaking, MBS and the 10 Year Treasury are well poised for lower rates despite the FOMC, but we’ve got the monthly jobs report tomorrow.
