Portland Mortgage Market Update — June 28, 2024

All eyes were on today's PCE report. The Personal Consumption and Expenditures report is the Fed's preferred measure of inflation, and the market was hoping for a cooler report to support the notion that Fed rate cuts might start sooner rather than expected. Expectations were at a 2.6% increase and it came in right at that number at 2.57%. This is the lowest inflation reading we have had since March of 2021, which was the first time in this economic cycle that inflation topped 2%. All in all- this is good news for interest rates and shows that we are firmly headed in the right direction.

But somehow, rates are worsening? Yes, after showing a slight improvement on the news of the PCE report, the market is now worsening a bit. There is still some uncertainty as the market digests fallout from last night's debate along with differing opinions offered by various Fed members yesterday. Fed Governer Michelle Bowman (who has consistently been against lowering rates) said yesterday that she is "still willing to raise rates again if inflation doesn't ease." Conversely, Fed Governor Lisa Cook said "with significant progress on inflation and the labor market cooling gradually, at some point it will be appropriate to reduce the level of policy restriction". It should be noted that Lisa Cook is an economist, and Michelle Bowman is an attorney and generally, well, an idiot.

Next week is another important one with jobs reports coming in on Friday. While the BLS numbers have come under some scrutiny as to their validity the past couple of months, this is still an important part of the Fed's decision to adjust policy. The ADP report will come on Wednesday and that seems to have more accurate figures, but doesn't carry the same weight.