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The Beginning of the End for Higher Rates
July 18, 2024
Hello everyone. Welcome back to the Mortgage Rundown. Today, we are going to talk about what is happening with interest rates.
The second half of 2024 has barely begun and we are already seeing rates trend down. Over the past couple of weeks, the 10-year Treasury has dropped 38 basis points and if you look over the past year, it appears we are on a serious downward trend in rates.
The chart on your screen shows the 10-Year Treasury and as you can see, rates have been on this trend since the end of April. Earlier this year, we saw a somewhat defeated market that felt inflation was never going to get closer to the Federal Reserve's target in 2024.
Now with the most recent inflation data, it does appear the Fed's target will be met this year.
Just to get some perspective, take a look at this second chart which shows the 10-year since the beginning of 2021. As you can see, rates have moved steadily higher for three straight years. Now even though this recent downtrend in rates is welcome, we still have a long way to go to get back to a more normal level for Treasury rates.
In another boost to the market, recent comments from Federal Reserve Chairman Jerome Powell indicated that the Federal Open Market Committee (FOMC) will need to move its benchmark rate well before inflation hits the targeted 2%, due to the lag in policy decisions and the impact on the market.
The FOMC meets on July 31st and it's widely expected they will make no changes to rates. But if the Fed is to move like the market expects in September, then we should expect some language changes in their July announcement about the likelihood of a September rate drop.
That's it everyone from the capital markets desk this week. Thank you all for watching and have a great day.
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