Fed Holding Rates Steady

The big news this week for mortgage rates was the Federal Reserve (Fed) meeting on Tuesday and Wednesday. As expected, they decided to maintain rates at their current level. 

Summary of Economic Projections: Slower Growth Ahead

Also released at this week’s Fed meeting was an updated Summary of Economic Projections (SEP). This gives thoughts and projections on where the economy is headed with regard to several important metrics like GDP, Interest Rates, Inflation, and Unemployment.

The SEP showed that the Fed expects GDP to be lower, unemployment to be higher, and inflation to be higher. 

Fed Rate Outlook: Two Cuts Anticipated

The majority of Fed members show an expectation of 2 more .25% rate cuts this year.

• Current rate levels are restrictive, meaning that rates are slowing the economy intentionally.
• When the Fed lowers rates below a certain level, they become accommodative, spurring economic growth. 

Most economists estimate that the Fed could cut rates 1.00-1.50% and stillremain restrictive. 

Waller Comments: Possible July Rate Cut

On Friday, we heard some good news from Fed Governor Christopher Waller. He stated that the Fed needs to start looking beyond the tariffs and cut as soon as next month. Waller is an influential member and may be in line to take over the Chairmanship next year.

WARN Notices: Job Loss Warning Signs

A harbinger of bad things to come on the employment front is a WARN notice. WARN notices are required by law to be provided by large employers before they make mass layoffs.

May WARN notices hit 46,000, the highest since Covid and the Great Recession in 2008. This could lead to worsening unemployment and push the Fed to react sooner with lower rates.

Retail Sales: May Data Misses Expectations

Retail Sales for May also showed economic weakness. The report showed a decline of 0.9%, worse than the decline of 0.7% expected. April’s number was also revised lower. Big ticket items like automobile sales were way down. Consumer spending is the lifeblood of the economy, and Retail Sales are a good indication of that spending.

Looking Ahead: All Eyes on PCE

Next week has rapid-fire critical economic reports, crowned by PCE on Friday. The Personal Consumption Expenditures (PCE) report is the Fed’s favorite gauge of inflation.

Monday, June 23

• Existing Home Sales

Tuesday, June 24

• Case-Shiller Home Price Index
• FHFA Home Price Index

Wednesday, June 25

• New Home Sales

Thursday, June 26

• Durable Goods Orders
• Initial Jobless Claims
• Pending Home Sales Q1 GDP

Friday, June 27

• Personal Consumption Expenditures (PCE)