MBA Economist Mike Fratantoni on Jerome Powell’s Remarks Indicating Cuts

Federal Reserve Chair Jerome Powell spoke Aug. 23 at an economic symposium sponsored by the Federal Reserve Bank of Kansas City, in Jackson Hole, Wyo. His remarks implied the likelihood of near-term rate cuts.

“Chair Powell just rang the bell to start rate cuts. He was careful to note that incoming data will inform the pace of cuts, but a cut is coming in September, and this cut will be the first in a series that should bring the federal funds target down significantly over the next 18 months,” said MBA SVP and Chief Economist Mike Fratantoni.

“The softening of the job market has given the Fed the confidence that inflation will not re-accelerate. There is certainly a risk that the unemployment rate could rise faster and further than the Fed would like, but Chair Powell indicated that they are watching and would react to such a further softening in the job market,” Fratantoni continued.

 “The themes in Chair Powell’s speech were largely anticipated by the market, and I don’t expect mortgage rates to move much in response, as investors had already priced in a path for rate cuts,” he said. “However, the immediate reaction to the speech resulted in some reductions in longer-term Treasuries and secondary mortgage market yields, so mortgage rates may be somewhat lower in the near term. Our forecast continues to look for mortgage rates to drift down closer to 6% over the next 12 months or so.”

For the full text of Powell’s statements, click here.