Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with Interest Rates.
Over the past month and a half we have seen a dramatic drop in rates. The 5-year Treasury, which was almost as high as 5% in October, is now getting very close to 4%. Thanks to data that continues to show that inflation is cooling down along with a Fed that hasn’t raised rates for three straight meetings; it’s given the market newfound confidence that the peak in interest rates is behind us.
If you look at the graph on your screen, you can see exactly how much rates have dropped recently and the big question is whether or not that trend will continue.
All of the current inflation measurements show that inflation is dropping, which has helped to bring down interest rates. One of the things that has been keeping rates higher for longer is the jobs market.
Just as a refresher, the unemployment rate is still sitting below 4% but it does appear that it’s starting to rise. But it also hasn’t moved enough where if you are the Fed, you have 100% confidence that the war on inflation is over.
One interesting piece of data that came out this week was JOLTS. JOLTS is the total job openings published by the Bureau of Labor Statistics. This week it showed that there were 8.7M job openings. While that is still a ton of job openings, if you look at the graph on your screen you can see that it is coming down pretty quickly. It tells us that the labor market is still strong, but softening rather quickly.
Put all of this together and I would expect the Federal Reserve to pause next week as part of their December rate decision. It doesn’t mean the inflation battle is over, but it should give the Fed plenty of evidence to pause and that should help keep rates from rising.
That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.
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