Good Afternoon!
Hope you all had a wonderful weekend! We had a busy weekend! It started on Friday with an all-school picnic at Noah’s new school, St. Anne’s, where he just started Pre-K. Saturday we started the day off with a hike in Evergreen and then, via unanimous backseat consent from the children, we had to get ribs. We stopped in Kittredge at a place called Switchback Smokehouse. Great BBQ. On Sunday we did the usual Platt Park Farmer’s Market and then played outside in the backyard and watched football all day. Glad to Broncos got the Win! No fun starting the season 0-2!
THE FED HIKED. LET’S TALK ABOUT WHAT THAT ACTUALLY MEANS.
So, Wednesday happened. The Fed raised rates a quarter point to 3.75% to 4.00%, the first hike since 2023, and it wasn’t a close vote either, it was unanimous, 12 to 0. The reason behind it is inflation. Chair Warsh said plainly that inflation has been too high for too long. In my opinion, it was the wrong decision, and the Fed is trying to regain American’s confidence. It’s also akin to looking in the rear-view mirror while driving. Time will tell of course.
Alongside the decision, the Fed released its dot plot, basically each of the 18 committee members quietly writing down where they personally think rates need to be by the end of the year. 16 of those 17 officials think we’re not done yet (For reference Warsh is declining to participate in this for now). 12 see one more quarter point hike coming (that’s the median view), 4 think we need two more, and only 2 of the 17 think we should hold right here.
Now here’s the nuance I want you to be able to see.
The Fed funds rate isn’t the same thing a buyer’s 30-year fixed rate. Fed hikes are the tool being used to fight inflation, and mortgage rates move more with what bond investors think is going to happen to inflation over time. If these hikes work and inflation starts to come down, that’s actually good news for long term rates. Confident bond traders buy more bonds when they believe inflation is under control, and that demand is what can bring 10-year Treasury yields, and mortgage rates with them, down over time.
Therefore, more hikes today don’t automatically mean higher mortgage rates tomorrow. It depends on whether the market believes the Fed is winning the inflation fight.
What that means for buyers right now: don’t think rates are locked in at today’s level because “the Fed isn’t done.” The honest answer is that it depends on how the inflation data comes in over the next few months. If it cools, we could see some relief in the 30-year even with another hike or two on the books. If it doesn’t, we will probably sit here a little longer, and have 30-year fixed rates above 7%.
Either way, the conversation isn’t a guess about where rates go, it’s what your payment looks like today and what options you have to manage it.
What To What For Next Week
Geopolitics will likely take center stage next week, with a relatively light economic calendar and several Fed officials scheduled to speak. Presidents Trump and Xi are set to meet in Washington on Thursday, September 24th, with trade expected to dominate the conversation. For markets, the main goal is simply continued stability in U.S.-China relations. Expectations for a major trade breakthrough or significant tariff reductions remain relatively low.
Iran will also be part of the discussions, as Washington looks to Beijing to use its economic influence with Tehran. However, the bigger immediate risk remains the Strait of Hormuz. Any renewed attacks on oil shipping could quickly send crude prices higher, with WTI potentially testing the $105–$110 range.
Economic Data
Following this week’s rate hike, this week’s economic calendar is quiet. The main reports to watch are September’s Philly Fed services survey on Tuesday, August new home sales on Thursday, and preliminary August durable goods orders on Friday.
With no major inflation or employment reports scheduled, these, normally second-tier releases, could receive more attention than usual.
Durable goods orders are expected to decline 0.3% month-over-month, while core capital goods orders excluding aircraft are projected to rise 0.5%, an improvement from July’s flat reading. Shipments will also be worth watching because they feed directly into Q3 GDP. Technology spending has received a significant boost from the AI boom, although weaker August production in computers and electronics could point to some cooling.
Housing
August new home sales are expected to increase 1.3% from July but remain roughly 11.9% below year-ago levels. That would reinforce the broader weakness in housing, following existing home sales falling to a 14-month low as mortgage rates climbed back toward 7%.
Fed Speakers
There will also be plenty of Fed commentary next week. Scheduled speakers include Austan Goolsbee, John Williams, Philip Jefferson, Michael Barr, Anna Paulson, Tom Barkin, and Beth Hammack.
Williams, Paulson, Jefferson, Barr, and Hammack are 2026 FOMC voters, making their comments particularly important following this week’s rate hike.
With Kevin Warsh providing relatively limited forward guidance so far, markets will be paying close attention to the other voting members for clues about what comes next.
Bottom line, this week is less about major economic reports and more about geopolitical risk and the Fed’s message. The Trump-Xi meeting and developments surrounding Iran and the Strait of Hormuz could drive volatility, while Fed speakers may provide the clearest clues about whether this week’s rate hike was a one-off move or the beginning of a broader shift in policy.
Have a wonderful week ahead!
1 Year Look at the 10 YR Yield:
Chart of the Week:
Pending Home Sales For August:
The pending home sales index sits at 71.2, the third-lowest level since January 2025 (last month and January 2026 were lower). For context, this is below the June 2010 cycle low of 76.4 and even below the April 2020 level of 71.8, when the whole economy shut down for a month. A sign of a market deeply depressed on a structural level by affordability concerns.
The Relationship Between the 10 Year Yield and Mortgage Spreads & 30 YR Fixed Mortgage Rates
Current Spread of 10 YR Treasury to 30 YR Fixed Rates stay flat at 1.97%. We are still looking to get back to the long-term average of 1.50% – 1.80%.
Long-Term Mortgage Spread Chart (1970-Present):
This Week’s Economic Data & Reports:
- MON – Fed Speakers, Chicago Fed National Activity
- TUES – ADP Employment Change Weekly, Richmond Services & Manufacturing Indexes, Fed Speakers, 2-Year Note Auction
- WED – MBA Mortgage Applications, Manufacturing & Services PMI’s
- THURS – Jobless Claims, Building Permits, New Home Sales, 7-Year Note Auction
- FRI – Durable Goods Orders (MoM), Michigan Consumer Sentiment
People have asked where to track this stuff daily so here is the Bloomberg Website where you can see the reports/data:
https://www.bloomberg.com/markets/economic-calendar
Thanks for reading and have a great day!
