All Eyes on the Fed Next Week
Join me in our ‘Weekly Market Update’ to decipher what to expect in the coming weeks & months.
Happy Friday, Brian Manning here with the weekly update. Let’s get right to it.
There’s actually not a lot to discuss this week. We’ve seen mortgage rates make a nice run lower and then kind of flatten out, which is okay. All eyes are now on the Federal Reserve. Next week, we’ll be waiting to see what happens during their two-day meeting. My personal opinion is that the Federal Reserve will likely implement a quarter percent rate cut. I don’t think we’ll see a half percent cut, as there hasn’t been enough drastic economic news to warrant such a move. However, I could be wrong, and we’ll have to wait and see what happens. It’s all speculation at this point. We did see the European Central Bank (ECB) cut rates again this week, also by a quarter percent. The ECB started this process earlier than we did and has now cut rates by a total of half a percent. It’s good to see this, as global markets are interconnected. When one central bank cuts rates, others often follow suit.
Let’s take a quick look at the Consumer Price Index (CPI) report we received this week. CPI is a gauge of inflation, and it’s also what the Federal Reserve looks at. For August, the headline rate decreased from 2.9% to 2.5%, which is good news. However, the core rate remains unchanged at 3.2%. The core rate is important because it excludes volatile items such as food and energy, giving us a clearer view of underlying inflation.
One concerning aspect is that shelter costs have remained stubbornly high. The report showed shelter costs increasing from 5.1% to 5.2%. This figure seems disconnected from other reports, which show shelter costs rising at an average rate of 3%. This discrepancy is puzzling and indicates a slow adjustment in the data.
On a more positive note, motor vehicle insurance costs decreased from 18.6% to 16.5%. Despite this decrease, it’s unlikely that changes in Federal Reserve interest rates will have a significant impact on motor vehicle insurance.
Inflation on a month-to-month basis moved up by only 0.28%. Of this increase, shelter accounted for 0.23% and motor vehicle insurance 0.02%. All other goods only increased by 0.03%. If we consider this, it suggests that inflation is relatively under control.
So, as I mentioned earlier, there’s not much to talk about today. All eyes are on the Federal Reserve next week, and we’ll have to wait to see what happens. I’m around all weekend if you want to learn how we’re closing purchase transactions in 10 days from start to finish. Give me a call. Have a great Friday!
-Brian
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