It’s Fed Day! Fed Funds Rate Cut 50BPS! [LIVE Post]

This is one of the most highly anticipated “fed days” that I can recall with the expectation that the Fed will lower the funds rate for the first time in four years. The question is, how much will the fed reduce the funds rate? Odds are currently at a 50-basis point drop, which is what the markets are betting on.

When the Fed makes adjustments to the funds rate, it does not directly corelate to mortgage interest rates. We won’t see mortgage rates go down by a half point because of a 50-basis point change to the funds rate. Mortgage rates are influenced by the actions the Fed take as mortgage rates are based on bonds (mortgage-backed securities). As I write this post (9:30 am on 9/18/24) MBS 30YR 5.5% is down 13 bps and the Dow is down 16 at 41,589.

Stay tuned! We will have the announcement of the Fed decision followed by the press conference in just a couple of hours.

11:00 AM: Fed cuts rates by 50 BPS!!! From the Press Release:

…”The Committee has gained greater confidence that inflation is moving substantially toward 2 percent…. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of it’s dual mandate…. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.”

MBS 30 YR 5.5% is down 14 bps (has been bouncing a bit).  We’ll have the press conference at 11:30 AM. Dow is up 37.

I’m watching Fed Chair Jerome Powell at his press conference. It’s interesting to hear him admit how unreliable the jobs data has been with the BLS Jobs report. Many in the mortgage industry refer to it as the “BS” Jobs Report as it tends to dramatically impact mortgage rates while being known for being extremely off as far as jobs numbers with revisions made to the released numbers after the fact. ADP tends to have more reliable numbers, in my opinion.

Powell also answered questions on lack of affordable housing. He said basically said that lower mortgage rates will help with affordability and that we have a issue with a lack of affordable housing.

12:20 PM. The Fed press conference is over.

Next scheduled Fed meeting wraps up on November 7, 2024 where we could see another cut to the Fed funds rate. It’s anticipated based on the current “dot plot” that we will have an additional 50 basis points cut by the end of the year.

1:00 PM. The Dow closed down 103 at 41,503. MBS closed down 16 bps.