What’s Happening?
This was a relatively quiet month in the mortgage world. Labor and inflation reports are not showing significant changes in the economy and we’re hearing the “recession” word tossed around a bit. President Trump mentioned a “period of transition” [referring to the economy] and Fed Chair Jerome Powell repeatedly mentioned “uncertainty” during the Fed meeting last week.
All my bullets below are marked as generally “good for rates” however, rates are flat on the month. But I think that just means we’ll see rates drop in April & May.
•Stock markets are still dropping (good for rates): Tariffs, talks of recession and uncertainty in the economy are likely driving the last 2 months of falling stocks. The S&P500 was down 1.5% in February and is down another 6.2% in March. When markets drop, we see a “flight to safety,” which usually means bonds (including mortgage back securities). As investors buy bonds, that pushes the yield (and rates) down.
•Jobs Report (good for rates): The BLS February Labor Report released March 7th was a weak one and shows a weakening labor market.
- New jobs came in below expectations for the 2nd month in a row at 151k new jobs; 165k were expected. (slightly weak jobs data; pushes rates down a little)
- Unemployment YOY rose from 4.0% to 4.1%. (slightly weak labor data; pushes rates down slightly)
•Inflation Reports (good for rates): The news this week was the inflation data we got with the CPI (consumer price index) numbers. Inflation was slightly above projections, YOY being +3.0% instead of the expected 2.9%. Not much of a difference, but it did push rates up a bit on Wednesday when this report came out, however, rates recovered and improved yesterday and today with the weaker-than-expected retail sales data released today.
•Federal Reserve Meeting (bad for rates): The Federal Reserve had their meeting this week and they did not cut rates as expected. However, Fed Chair Jerome Powell threw around the word “uncertainty” a WHOLE lot. Enough to make you think they might know something they’re not saying. Fed Chair Jerome Powell essentially said, [paraphrasing] “The economy is pretty good, but if all of a sudden it was not very good, we are prepared to act QUICKLY…”
The expected number of rate cuts decreased after the Fed dot plot was released. Last week, markets were projecting 3 cuts this year, but now only 2 are expected. Surprisingly, mortgage rates still improved, which is the opposite of what you’d expect. I think we are all reading between the lines of Powell’s talk of “uncertainty” and rate markets are acting in kind.
