Portland Mortgage Market Update — May 9, 2025

It was Fed week! Most attention this week was directed to the Fed meeting (which concluded on Wednesday), and Fed Chairman Powell's post-meeting press conference. No one expected the Fed to cut rates at this meeting, and they didn't, but we are trying to glean some insight into the Fed's thinking in this new "post tariff" world. Bottom line- the Fed believes they can take a "wait and see" approach to responding to the tariff fallout, commenting that the economy is still relatively strong with inflation back in their preferred range when not taking the tariffs into account.

Waiting is the hardest part. Yes, the Fed as always said they will remain data dependent and will not make any moves based on forecasted or predicted economic outcomes. In fact, they were so emphatic about waiting that Powell used the word "waiting" 22 times in his 48-minute press conference. He also acknowledged that the effects of Fed Policy are slow to trickle into the economy and the full impact of a rate cut may take 6-9 months to show up. This is causing some concern in the market and is reminiscent of 2022 when inflation was spiking and the Fed kept calling it "transitory." They decided to wait for more data to support a rate hike when the entire market (and common sense) saw that the effects of pandemic stimulus packages would light a fire that was stoking prices higher.

Currently the market is wary of the outcome of US-China trade talks this weekend. Trump floated the idea today of reducing the China tariff to around 85%, which is pretty much lip service because anything over 45-50% is restrictive enough to kill all trade. But coming on the heels of a successful trade negotiation with the UK, there is cautious optimism. A successful meeting would help stocks/hurt bonds whereas if talks fall apart we may see a rally in interest rates.