You always must pay attention when the FED speaks, yesterday the FED spoke and shook the markets. While the move was quick and sharp, the bond market was able to recover the steep loss by the end of the session. The reaction just proves why you must listen to the FED when they speak, and sometimes when they shake up the market the market recovers quickly, other times it starts a trend. Given the news and the thoughts they shared, it won’t be long before the next trend will begin, and it won’t be your friend.
Looking at the news, the “transitory” inflation as they call it has made their inflation prediction to 4.2% from 3.4% just last June. Given the target rate of 2%, even a rosy forecast of 2.2% for 2022 is still higher than the target rate, and is all growth based on a very large number in 2021. In other words, inflation may slow down, but prices are NOT going back down to where they were, no matter what people have said that the market would return once everyone went back to work, and the supply chain was restored. I’m not sure who believes that thought process.
The FED “Dot Chart” a forecast that has always been far from reality when it comes to predicting the future, anticipates 6 or 7 rate hikes through 2024, and with the beginning of the “tapering process” likely to begin shortly, get your refinances in and locked before the opportunity slips away. While rising mortgage rates won’t hurt purchase business all that much as far as total transactions go; it will be a mixed bag of good news and bad news. FHA, VA, USDA, Bond Programs, and down payment assistance loans will come back in style, and while much of the multiple offer situations should dissipate, welcoming back these buyers, don’t be surprised if all cash deals remain strong.
Keys to watch will be the September Jobs report and the inflation report shortly thereafter. These numbers may delay the FED reaction by a month or so; but don’t be surprised if the FED lets the markets figure it out for themselves sooner rather than later!
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