Are You Waiting for a Fed Rate Cut? Here's What to Expect

so I thought I'd post one last report before the holiday weekend hits us uh because rates are actually moving a little bit right now in the right direction and I want you guys to understand the wise behind it so rates over there you see it's down 0.01 so 100th of a percent no nothing really write home about but there's some context right here I want you guys to to listen to and watch but right through here here's what's happening with mortgage rates you can see the market kind of just plummeted at the beginning I don't want to say plummet it was down about 10 or 12 points at the beginning and then it rallied all the way up to here uh we're up seven basis points and then the market closed markets closed at 1:00 and then you had a a reprieve right there I think you know some sellers what you want to look through here also is every time you see one of these uh a bank reposted better rates so if you're mortgage advisor I'd highly suggest MBS live you subscribe to the system it's a lifesaver so what I want to present to you guys today is right now is what what the expectations are in regards to a a recession what the fed's going to do because the number one question get from everybody is Dan when's the rate you know when's the FED going to reduce rates and Dan you don't know what you're talking about because every week you say something different but I want you guys to get the context from this person right here in this interview and then once it's done it's only a couple minutes long I'm going to put it a lot of it in context to you with a lot of the things that we've been talking about over the last couple weeks couple months and couple years so without further Ado let's get over to it Goldman is pushing back its prediction for the First Rate cut to September from July following some strong economic data this week our next guest remaining optimistic when it comes to the inflation Outlook leading him to predict two to three rate Cuts this year joining us now National Bureau of economic research director John lipsky uh the nbe is officially responsible for calling a recession in the US uh thank you for being here John uh are those cuts uh predicated on any kind of official recessionary call or do you think they're coming no matter what not at all first of all I want to make clear uh the BR has a business cycle dating committee I'm not a member of that committee it's all uh independent academic experts that will examine this the issue of timing of us business cycle but the important point is this the overarching qu question of importance to uh investors and officials is whether the economy current economy needs to slow to bring inflation down and if that's the case or not the qu second question is is Federal Reserve policy poised accordingly or in uh accurately with regard to the inflation Outlook and so the most important thing is understanding where inflation is headed and that's been very difficult to for forecast accurately over the last few years now what uh what we've seen is in 23 early 23 last year uh the early month showed an acceleration of inflation that was uh that was subsequently reversed and the inflation rate slowed the question an open important question is that the case again this year because the surprises so far this year have been inflation rate inflation figures that a little stronger than expected if there's good reason to it to think that it's going that inflation's going to recede that is opens the outlook for the economy and for fed policy in a different way is that all you need though do you just need inflation to recede or do you need to see more significant deterioration in the labor market if you would also pay attention to the charts coming up right through here because it's nice how CNBC as he's talking about specific things they bring up charts and then after this there's some charts they didn't bring up I'll bring up so I can put all this in context for you Market as well well that's an open question but remember prior to co the economy was growing at a faster rate in general than at present it the uh unemployment rate was similar to the current rate and inflation was a full percentage point or more lower than it is today so the answer is not immediately obvious that the uh that there needs to be a weakening in the employment market and the however nonetheless the latest data which many have interpreted as strong if you look at the implications for the labor market you saw a uh a deterioration today in the uh consumer confidence figures now that almost never provides independent information it tracks imp uh income Trend so it suggests that income growth is slowing and if that's the case and if we look at the the uh PMI the purchasing managers index that showed a deterioration in employment expectations there's certainly reason to expect that the labor market is headed for slower growth in employment and perhaps some slower growth in income and that is an important implication among other things for fed policy if that's correct John I'm glad you brought up the notion of data because we do know the response rate to surveys has withered some say collapsed we've seen weird uh splits between household and establishment on the labor front don't get us started on Lei and it's called for a recession for a year I just wonder are there metrics that you relied on for years that you no longer rely on as much well I I as I suggested in my early remarks uh absolutely important in understanding uh basic Trends in the economy is look at what's happening to real household disposable income and we can see that that's growing at a relatively steady Pace but it looks like it's going to slow somewhat and when we look at household finances you can see that some of the excess cash balances that have built up over the uh in the co period are are essentially dissipated at the same time you you want to look at housing markets which have been an important indicator uh and we can see that they are certainly softening there are other some some other danger signals at this time for the economy that I I don't think are going to derailed uh growth but for example commercial real estate is certainly uh in uh in a very weak situation that'll have some impact on the financial markets big picture there's every reason to think that growth actually could slow from here somewhat there's no there's no clear obvious at this time no obvious recessionary signs or anything close to it but as I said looking back to the pre-co period we're it's a situation which it's not immediately obvious that we need further slowing in the economy uh to get inflation down and at the same time the FED says today that its policies are are are restrictive so the question is is that is that going to prove to be appropriate for the coming months so he said right at the end there he said is the policies restrictive so how they how they Analyze That many times is they take the yield right through here uh on the 10e so you're seeing that right through there and they add 1.5% to that so if you do that with this we'll just round it to 4.5 plus 1.5 it's 6% so that's normally where rates would be in a normal Market but what you have right now is the anomaly of that and then they also talked about the Federal Reserve you know when they're going to reduce rates so they're still it's all over the map on when that's going to take place so here this is actually the probability what they're going to do over the next few meetings well through the next year and there's a probability look they they just added this column in there today I don't really know why but 5 and a half to 575 there's there's not even a point there's not even 1% chance of this happening so the the expectations are they're going to keep rates uh higher for longer right through here and then you're starting to see in August and September that's when the pendulum moves a little bit so the analyst that was just on there he's expecting two rate cuts and that's most likely going to be in August and then September I'm on the point of one or two rate cuts at 0.25 per okay so that's what we have right there so that's my report so far uh that we have right now I did post a video out there I think a lot of you guys if you're out there and your first-time home buyers you need to watch this video and I'm I'm I don't mean to Hype it this much but I show you behind the scenes on once you put in your application what really takes place how do we look at it what do we look at what do we monitor where you can get your rates how to figure out interest rates how where you can get your credit reports so you can do a lot of this on your own because I want you to understand you know the housing market the real estate financing piece of the equation and everything else so if you're in the market right now and you're you're trying to kick the tires to say you know I I'd love to buy a house I'm just struggling I don't know really which directions to take I'd love to help you my name is Dan Frio I'm a license mortgage advisor loan officer I'll put it that way when I say mortgage adviser a lot of people get confused on that so I'm a loan officer licensed in all 50 states as well as Puerto Rico I'd love to help you navigate this scenario so if you need some assistance with that folks please reach out to us uh my my website is the rate update.com and when you get there please don't forget to check out the grant Finder right up there you're going to hit Grant you're going to see if there's a Grant El if you're eligible for any grants that are 100% forgivable And then the next step is to put in the application and get the get the ball rolling so love to help you guys have a fantastic holiday weekend be safe God bless and I'll see you back here next week same time say Place bye-bye

Channel: The Rate Update with Dan Frio

Views: 1,929

Keywords: mortgage rates, mortgage guidelines, real estate market, first time home buyer, mortgage interest rates, Dan Frio, win the house you love, kyle seagraves, Fha, VA mortgage, DSCR, USDA, the rate update, Mortgage Rates 2023, How to buy a home, how much can i afford, how much money do i need to buy a home, housing market trends, Home buying tips, Real estate news, buying vs renting, real estate market analysis, real estate finance, real estate investing strategies, homeownership

Id: 0_i8c_Vv9w8

Length: 9min 41sec (581 seconds)

Published: Sun May 26 2024