The Fed let it be known yesterday that it will definitely raise the Fed Funds Rate by 0.75% on September 21st… and the market yawned.
As Barry Habib reminded us this morning, everyone used to engage in a huge guessing game – in regard to what the Fed might do.
And – if the Fed did something actually surprising, all hell would break loose.
BUT – not anymore, as the Fed now effectively leaks its next move to the press – so everyone knows exactly what to expect.
What To Expect?
What to expect is more of the same, as the market has now “priced in” or accounted for the increase in the Fed Funds Rate.
So, when the Fed makes it official on September 21st, the markets/rates will move little in response to that news.
As a reminder (#7,847 😊), the Fed Funds Rate is a short-term overnight rate that banks charge each other for overnight loans.
As such, the Fed Funds Rate does not always move in unison with longer-term/mortgage rates.
And, once again, if the markets perceive the increase in the Fed Funds Rate as (1) a successful inflation-fighting effort; and/or (2) something that might weaken the economy – rates can fall in response to increases in the Fed Funds Rate.
Ammo For The Next Recession
The Fed Funds Rate will be 3.0% to 3.25% after the next rate hike – and that may be a good thing because it will give the Fed some ammunition to use to fight off the next (or current – depending on who’s measuring) recession.
If the Fed raises the Fed Funds Rate again in November, it will have a decent amount of ammunition, as a quick drop in the Fed Funds Rate of 3% to 4% would spark a lot more lending and economic activity.
I say “could” because that did not work in Japan… but that is another story.
Barry: “Relief Coming In Q4 Or Q1”
In his MBS Commentary this morning, Barry reminded everyone to hang in there because relief will be coming in Q4 or Q1, as he still believes rates will fall by then.
I know that there are numerous macro pundits who fervently believe rates will stay high well into 2023, but I remain on Team Barry, in light of his track record.
CoreLogic Predicting 3.8% Appreciation Over The Next Year
The last point I want to scream from the mountain tops is that CoreLogic is predicting 3.8% appreciation over the next year.
This Business Wire article summarizes the full report, and I highly recommend reading (AND SHARING) the full report.
CoreLogic’s entire business and reputation is based on accurate predictions, and 3.8% APPRECIATION DOES NOT SOUND LIKE A HOUSING CRASH TO ME.
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