Portland Mortgage Market Update — August 29, 2025

The week opened with drama surrounding Fed Governor Lisa Cook, with President Trump firing her from her role at the Fed on Monday. She is 2 years into a 14 year term and she has no intention of stepping down and yesterday she filed suit against Trump, arguing the White House has no authority to remove her from her role at the Fed. While this may appear to be normal everyday squabbling between President Trump and whomever he has in his sights that week, this is important because the Fed was established to act independently of politics, and much of the world invests in the United States with the understanding that regardless who is sitting in the Oval Office, the US economy will continue to function on its own because the Fed is insulated. This morning a hearing is in progress on Cook's request for a temporary restraining order to prevent her removal, which is basically going to be a stop-gap effort for her to keep her job temporarily while this larger issue plays out and is expected to be resolved by the Supreme Court.

The week closed with the Fed's favorite inflation report, the PCE Index. While it came in at its highest level since February, this was pretty much expected because, well, Tariffs. The Tariffs are finally trickling from the ports to the retail aisles and most investors are assuming these price bumps are going to be a one-time hit to the system. The market is still banking on a 25 basis point rate cut at the Fed's next meeting on the 17th with an 89% chance, and there is an 87% chance we will see another 25 basis point cut before the end of the year.

But that might not be enough for one Fed Chair candidate. Fed Governor Waller, one of the leading candidates for the next Fed Chair, thinks the labor market is worse than we think and will continue to worsen. He believes that after the QCEW gets released it will show a large negative revision in the May-June numbers to the tune of -60K per month. He also addressed the Fed Neutral rate, which is the rate the Fed should be at that both keeps inflation in check and the labor market healthy. In his calculations, he believes the neutral rate should be around 3%, which is 1.375% LOWER than where we are currently at. Imagine the activity that would pick up if rates were in the low-mid 5's again!