In our Strange Bedfellows post we mentioned Oil/Interest rates/CPI all connecting to put upward pressure on all of these measuring sticks.
FOMC – (Federal Open Market Committee) Chair President, Kevin Warsh was forced by bond markets to raise rates in order to thwart further inflation/inflation expectations….
Our main research contacts have CPI headed up even more, mostly due to Oil in the coming month, which may very likely put Warsh in a mandatory raise again mode!
Last week In a conversation with a knowledgeable friend, “What would have happened if he had not raised rates or even lowered?”
The text book answer is rates would have gone much higher… no one knows for sure… but recall an increase in short term rates is desired to lower inflation expectations, thereby long term rates as well !
Back quickly to our Strange Bedfellows post, a slightly taken out off context …
From the post “I am the House now!“ ….. Never, ever, challenge Wall Street! – No matter who you are…not even giving the appearance of such is a good idea! Too many egos..”
The thick Goldish line are average 30 year Mortgage rates… yep, that is over 7% a far distance from what Bessent. Warsh, and all policy makers and any house sellers desire….
While we can debate if a 7% Mortgage rate is historically high or not… it is certainly much higher than recent experiences and will likely NOT do much to free those trapped in lower Mortgage rates and many sellers who were hopeful for a liquidity event…
In closing, for now the path is higher Inflation, higher rates possibly short and long term…. BUT as we look way out (being silly here) to the spring of 2027, as mentioned in our Summer Newsletter, a longer term format…. Comparable’s will like drop CPI readings dramatically…
Oddly this event, could cause just the opposite concerns… A dramatic Slowdown… but would also bring along lower rates, both short, longer term AND Mortgage rates !
Have a Great “Rates/CPI and expectations” Update!
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 when appropriate.
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
