Good Tuesday AM from your hometown lender,

Today is Day 1 of the 2-day Fed meeting.

We will have the decision and direction from the Fed starting at 11am tomorrow. Should the Fed cut, 100%, will they, nope. The data just keeps coming in showing a slower economy. On top of nonexistent inflation and a softening labor market (which we saw again last week), today’s data showed that retails sales recessed .9%. By the way, Retail Sales account of 70% of GDP. Recessing Retail Sales is no bueno for the US. On top of the glaring issues that higher interest rates continue to cause, the secondary and more expensive issue we are staring down the barrel at now is the US debt service. If nothing else mattered, the Fed needs to cut rates just to allow the US to better be able to pay the interest on the loans we have outstanding. 

With today’s very weak retail sales data and the dismal NAHB index (I don’t ever recall it being at today’s reading of 32.. 50 is the difference between growth and shrink), rates have improved a bit. It would be more than a bit, but markets are not going to get too far ahead of tomorrows fed meeting. Generally, the day before the Fed meeting conclusion is a pretty calm day in markets, basically the calm before the storm.

Markets will be zeroed in on what the Fed will say tomorrow, especially Fed Chair Jerome Powell during his post-meeting press conference. This meeting will bring a new dot plot, the anonymous individual forecast of where rates will be in the next few years, but it isn’t likely we see any big changes from last quarter. Despite the better-than-expected inflation data this month, expect the Fed to be on alert to defend against an increase caused by tariffs. No soup (cut) for you.

Here is a little snippet from on e of the media sources I follow:

For mortgage interest rates to decline, the economy must show signs of cooling.

“We’d need a real pivot moment — like a clear, sustained drop in inflation or a crack in employment that forces the Fed to cut sooner than expected,” Rueth says. Weak economic reports this summer could provide that catalyst.

“A cooling economy or softer labor market reduces inflationary pressure, prompting the Fed to cut rates,” says Glick. “This would [bring down] Treasury yields, and mortgage rates follow suit.”

Should rates begin to fall, it’s smart to expect increased competition as sidelined buyers quickly return to the market. This could mean a return to bidding wars and rising home prices, offsetting some of the savings from lower mortgage rates.

Stay safe and make today great!