“When we look at the indicators the Fed is monitoring, we don’t think we’re there yet (for a rate hike). But the Fed may just be tired of waiting to act,” Freddie Mac writes in its latest report from the office of the chief economist.
Freddie Mac writes it doesn’t see a compelling reason to raise interest rates anytime soon, meaning originators will likely continue to benefit from strong refinance business as clients take advantage of those low rates.
“In our opinion, we’re not there yet. The International Monetary Fund appears to agree with us—in June it cautioned the Fed against raising rates too soon,” Freddie Mac writes. “Nonetheless remarks by Janet Yellen and some (but not all) of the Fed governors and presidents have persuaded the market that Fed may nonetheless act in September.”
Of course, Freddie Mac is at arm’s length of the government – and has no influence on policy nor insider information – so it’s all just speculation at this point.
The report, penned by a number of Freddie Mac statisticians and economists, -- including Sean Beketti, chief economist for Freddie Mac – examines the evidence that the Fed will consider prior to making its decision September 16-17.
According to the report, the Fed is waiting for evidence that labor markets have recovered and that inflation is expected to surpass the 2% mark.
“Weak employment combined with stagnant wage growth suggests the Fed should be cautious in tightening monetary policy,” Freddie Mac writes, noting that the reduction in unemployment has largely been driven by workers exiting the labor force rather than employment growth.
“Inflation is running below the Fed’s 2% target and, if anything, is in danger of dropping lower,” Freddie Mac writes. “Core inflation, which excludes volatile food and energy prices, has been running below 2 percent on a year-over-year basis since 2008.”
Will it or won’t it finally happen? Speculation abounds about whether the Fed will hike its rate later this month, but one association believes the time hasn’t yet come to increase.