Good Morning on this best day of the week Wednesday from your Hometown Lender,

Though there has already been some data out today which was largely helpful for rates (ADP payrolls came in low), today is all about the Fed in about an hour. Rate sheets this morning are already a bit better than yesterday, and could get a whole lot better later this afternoon. Reprice risk though is high today, although chances are more likely we see reprices better than worse. The Fed announcement coming out at 2pm ET and Fed Chair Jerome Powell’s press conference at 2:30pm ET. The Fed is not expected to make any moves this meeting to cut rates, but everyone will be listening for what comes next.

Although it is unlikely the Fed will come out and say a September cut is likely…

Markets have gone all in that we will see at least a quarter point cut in September, followed by more cuts in November and December and continuing into 2025. Powell would have to have a big, BIG bucket of cold water to splash on things to slow down this train. Despite all of the hype which I do buy in to, it is never recommended to float into a Fed decision.

Bloomberg also shared:

Hello and Happy Fed Day. By now you’ve probably read all of the decision previews, and know that the expectation is that Powell & Co will set up the first rate cut to come in September. Certainly the market seems to think that’s a total lock.

So I’ll just keep this short. Yesterday we got the latest JOLTS Data, as well as the latest update from the Conference Board Consumer Sentiment survey. The reports dovetail with each other in a very elegant way.

One of the things measured in JOLTS is the Quit Rate (the percentage of people who are quitting their jobs each month.) Generally, when the labor market is booming, the quit rate goes up, since people have another job lined up, or feel that they can get another job easily after taking a break from work.

Meanwhile the Conference Board asks people to just qualitatively assess whether they perceive the labor market to be good or not.

So one is quantitative (a measurement of people getting their jobs and one is qualitative (how are the labor market vibes?)

It turns out that both are signaling that things are continuing to cool off in the labor market. Here’s the chart, which shows the Quit Rate Labor Differential Index are clearly below pre-Covid levels.

The direction and levels of the line are clear and the question is the degree to which they still have further to fall, and whether Jerome Powell can pull up the nose of the airplane at just the right time so that the landing is smooth.

Stay safe and make today great!