Mortgage Rates Are Actually Higher This Week

It was largely a dull week for financial markets in terms of scheduled data and volatility, but numerous Fed speeches helped reiterate what the market thought it already knew.  Specifically, whereas there was widespread belief in several rate cuts in 2024, the market now only expects 1.  The following chart shows the market's expectations for the Fed Funds rate at the end of the year.  This is a futures contract that has been traded for months.  In other words, when the line was lower in March and early April, it meant the market was expecting a lower Fed Funds Rate in December.  Point being: the orange line in this chart always refers to the December meeting.  The current Fed Funds Rate is 5.375, so anything in the 5.125 neighborhood implies a single 0.25% rate cut. On a more timely note, a rate cut at the July Fed meeting is now seen as a near impossibility whereas it was almost a certainty in early April.  The big spike in April followed the Consumer Price Index (CPI). While this week's data and events didn't do anything to accelerate the negative rate cut sentiment, it definitely didn't push back in the other direction.  Multiple Fed officials gave speeches that reiterated a logical reaction to hotter inflation data in the first quarter.  Here are a few highlights in mostly chronological order: JEFFERSON: THE LARGE INCREASE IN MARKET RENTS DURING PANDEMIC MAY KEEP HOUSING SERVICES INFLATION ELEVATED FOR A WHILE BARR: THE FED WILL NEED TO ALLOW TIGHT POLICY TO HAVE FURTHER TIME TO CONTINUE TO DO ITS WORK BARR: Q1 INFLATION WAS DISAPPOINTING, IT DID NOT PROVIDE THE CONFIDENCE NEEDED TO EASE MONETARY POLICY BOSTIC: ON INFLATION: WE'VE STILL GOT A WAYS TO GO DALY: I AM NOT YET CONFIDENT INFLATION COMING DOWN SUSTAINABLY TO 2% MESTER: INFLATION PROGRESS STALLED IN THE FIRST THREE MONTHS MESTER: THE APRIL CPI REPORT WAS GOOD NEWS, BUT IT IS TOO SOON TO TELL WHAT PATH INFLATION IS ON MESTER: WE CAN HOLD RATES, OR EVEN RAISE THEM, IF INFLATION, AGAINST EXPECTATIONS, STALLS OUT OR REVERSES MESTER: PREVIOUSLY, I EXPECTED THREE RATE CUTS THIS YEAR. I DO NOT THINK THAT'S STILL APPROPRIATE BOSTIC: I WOULD RATHER WAIT LONGER FOR A RATE CUT TO BE SURE INFLATION DOES NOT START TO BOUNCE AROUND WALLER: I NEED TO SEE SEVERAL MORE MONTHS OF GOOD INFLATION DATA BEFORE BEING COMFORTABLE TO SUPPORT AN EASING IN POLICY