The Federal Open Market Committee starts their two day meeting this morning. At the conclusion of the meeting tomorrow at 12:15 our time, we expect with a 97.8% certainty to hear that the Fed is dropping their overnight rate by .25%. A CNBC survey today of people-in-the-know expect the FOMC to decrease their rate by a total of 1.0% by the end of 2026. So hopefully, tomorrow starts the beginning of great things to come
Prior to the blackout period where no Committee members are allowed to talk publicly, several governors, including Jerome Powell, indicated that the FOMC would begin repurchasing Bonds that mature in their portfolio. The repurchasing of assets creates greater demand, increases prices, and allows interest rates to move lower. Since they started shrinking their portfolio a few years ago, the Fed has allowed over 30% of their portfolio, or around $3 trillion, to run off of their balance sheet. This action has kept long-term interest rates on the high side.
This morning, Case Schiller reported that home prices have increased 0.2% over the last 30 days and are up 1.5% over the last year. The previous reading showed an increase of 1.6% YOY. FHFA, which only considers conventional conforming loans, shows that prices are up .4% month over month. Though smaller homes are appreciating more rapidly than higher priced homes, price increases are clearly decelerating.
And lastly, in the absence of Government reporting for the last 27 days, ADP will begin producing their Jobs Report every week. Today they showed that there have been roughly 14,000 new jobs created nationwide over the previous week, which is a positive number, but still extremely low.
Clearly things are slowing down and if the Fed isn’t careful, they’re going to start seeing a lot of negative numbers on forthcoming reports. I suspect that the full impact the government shutdown is having on our national economy won’t be felt for several months, so now is the time to start doing something about it.
