Addressing other cowboys in Jackson, Wyoming this morning, Fed Chair Jerome Powell was as clear as the mountain air as he reiterated his policymakers’ stance to wrangle inflation down to 2.0% before they drop interest rates again.
As the Fed methodically hiked overnight interest rates this last year, the rate of inflation commensurately declined from 8.3% in August 2022 to 3.0% in June 2023. But then they reversed upward to 3.2% last month. That slight turnabout is unacceptable to Buckaroo Powell, et al, and the grounds for the Chair’s hawkish tone on the ranch today. The Fed convenes again in 25 days–this time back indoors–and there’s an 80.5% likelihood that they’ll leave their rates unchanged. The other 19.5% probability is for another increase, leaving a 0% chance of policy easing in September.
There is hope on the horizon however, several economic indicators published this week pointed to lower inflation ahead. Existing Home Sales numbers fell by 2.2%, Durable Goods Orders dropped from +4.4% last month to -5.2% this month, and the S&P Purchasing Managers’ Index declined 1/2%. Remember that in mortgage loans, bad news is usually good news.
Despite the Fed continuing to ride high in the saddle, mortgage pricing bucked the trend and reversed course this week, opening up the possibility for lower interest rates ahead. 
