Economic Indicators - What's Impacting Real Estate
- Mortgage Rates: The average 30-year fixed mortgage rate increased this week to 6.72% compared to 6.6% last week, according to Freddie Mac
- The yield on the U.S. 10-year Treasury note reached a new 6.5 month high on Thursday, following the Fed meeting on Wednesday. Mortgage rates follow the movement of the 10-year Treasury note
- The Fed: As expected, on Wednesday the Fed made a 0.25% interest rate cut, reducing the benchmark rate to the 4.25% to 4.5% range. Back to the same level of December 2022
- However the meeting disappointed the markets as the Fed reduced it's forecast for rate cuts in 2025, now just expecting just two rate cuts next year (from four previously)
- Fed Chair Jerome Powell noted that although inflation had moved much closer to the Fed's goal, we remain in a robust economy and the changes in their projections reflect expectations that inflation will be higher in the year ahead
- The markets tumbled following the disappointing outlook for 2025 interest rate cuts
- The Personal Consumption Expenditures Index (PCE): Was released today and shows further improvement on inflation - good news!
- The Fed's preferred inflation measure rose by just 0.1% in November, reflecting an annual increase of 2.4%, both below forecasts
- Excluding food and energy, the core PCE also showed a 0.1% monthly increase and a 2.8% year-over-year rise, with both figures coming in 0.1% below forecasts
- With the Fed's preferred inflation gauge coming in lower than expected, this may take some sting out of the market's disappointment following the Fed meeting. In fact the stock market has already jumped following the encouraging inflation news
- Outlook for 2025:
- The more gradual rate cut trajectory projected for next year reflects uncertainty surrounding the policies of President-elect Donald Trump's incoming administration. These include potential tariffs on imports, tax reductions, and large-scale deportations of undocumented immigrants—measures economists have cautioned could drive inflation
- Both optimism and apprehension have been stirred in the global financial markets regarding the potential policies that may come into place next year!
- What's Next:
- The second inauguration of Donald Trump on January 20 2025
- The Fed’s next policy meeting is scheduled for January 28-29 25.
