Good Thursday AM from your Hometown Lender,

Yesterday, the Fed kept its policy rate unchanged, as was expected.

Two Fed members were dissenting during yesterday’s vote and wanted to start cutting by a quarter-point (a big deal that hasn’t happened in decades). During Fed Chair Jerome Powell’s press conference, Powell didn’t show any signs of looking for a rate cut anytime soon. After the dust settled from yesterday’s Fed meeting and today’s early labor and inflation data, rates are about the same as Tuesday. A closer look at bonds will show some of the volatility we expected, but less than twenty-four hours later, that has worked its way through for now. Since it can’t be said that yesterday’s Fed meeting went our way and was helpful to rates (it wasn’t), this outcome is probably the best we can hope for as we head into tomorrow’s BLS jobs data and what is likely to be another volatile day.

Markets look to be stable today.

The economic data for the day is already out of the way. Jobless claims came in marginally higher (although lower than expected), some headlines are trying to make more of that by screaming that unemployment applications were “up for the first time in 7 weeks”. That is what makes me nuts with economic data. Who is spinning it is more important than the data. In a pure sense, unemployment claims are not a worry. A more fitting headline is the one that says, “jobless claims hold near a 3-month low.”

The other and far more important report to catch attention is the PCE inflation data. 

Forecasters are generally more accurate when predicting these numbers because previously released reports reveal most PCE components. That means we have to dig a little to find surprises. In today’s case, core monthly PCE was 0.256 unrounded versus a median forecast of 0.320 (which looks better than the conventional 0.3 vs 0.3). That good news was tempered by increasingly visible goods inflation, along with the knowledge that actual tariff impacts lag the announcement. 

The current question in front of us is to decide if floating and gambling on tomorrow’s jobs data coming in below expectations is better than taking the safer road of locking, knowing it is going to create volatility either way. The expectation for new jobs is at 102k, which is low, and while the print could of course come in lower, that is below average. I most often think locking is the better option going into a market-moving data release, and more so when the expectation is already dovish.  

Stay safe and make today great!