With many new followers, thanks so much for the time, we appreciate it, a reminder… this format is often a living diary of information that we use to not only to educate, inform and remind ourselves, but also to go back in the future to see what was said, what changed, and what was expected…. while recording all of this in real time here!
Last week the FOMC (Federal Open Market Committee) led by its chief, Jerome Powell made a rather interesting comment during their regularly scheduled meeting in that Powell re-iterated that the next move on interest rates is not up, but down…. Oddly this was a very similar statement to what was said in Q4 of 2023 that market participants cheered…. pushing interest rates WAY down…. our chart from the timely post just after the Q4 2023 meeting…
Why this matters?
A quick reminder: Interest rates have a tendency to slow and spur the economy (MAYBE – oh not to confuse and digressing here, but we may challenge this soon with federal stimulus dollars- more to come- now back) – Lower rates = Spur and Higher Rates = Slow the Economy GENERALLY – Far right dropping of the chart above is MUCH lower rates…
Why the FOMC had to repivot?
Economic data has stayed hot, mostly in the form of inflation readings…. pushing rates UP and possibly having market participants expecting HIGHER rates form the FOMC not lower in order to fight the Inflation data and continue to slow the economy or try…. So Powell and company were forced to Re-pivot and say once again say, eventually lower rates… not higher- which pushed rates downward, this time stubbornly…lets stay tuned to inflation data!
One Deep dive on QT aka Quantitative tightening:
Lost in the shuffle of press release and interviews, were something VERY important comments on – QT or the re-grabbing of money the FOMC put into the system via bond purchases– pushing interest rates down hard directly, especially Mortgage rates during 2020 through 2022!
The FOMC stated they will be slowing the QT of Treasury by almost half on a monthly basis ($75 Billion of grab back monthly to $45 Billion monthly a slowing) BUT they left Agency Securities aka Mortgages hanging out in the wind- All other things equal, possibly lower rates for Treasuries and higher or at least headwinds for Mortgages! Yikes!
Ok… know this was heavy, but we will likely point back to this in the future, hence the preface reminder…. Let’s just be aware of what is going on!
Have a Great “Re-Pivot Explained” Day!
John A. Kvale CFA, CFP
AI Content Authenticity: All of the following text content has been completed by myself and has not been edited or created by AI. Occasionally we do use AI for images and will note below the image when appropriate.
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
