Europe and Canada Make the First Move: Is A U.S. Rate Cut Next?

Hello everyone! Hope you all stayed cool during the scorching weather in Las Vegas this past weekend. Last week was a whirlwind in the mortgage world, and this week promises even more excitement. Let's dive into the latest updates!

Read time: ~3 minutes

Rates ended HIGHER compared to last week, and volatility was HIGH. Rates are in the low 7’s for most loan types without paying discount points. Paying discount points can get you in the high 6’s.

Europe and Canada Make the First Move: What Does It Mean for Us?

Last week brought some interesting news from across the pond and our neighbors to the north. Europe and Canada have taken the lead in cutting interest rates, aiming to stimulate their economies. This strategic move is designed to boost investment and consumer spending, setting the stage for economic growth.

While these countries have taken proactive steps to gain an early advantage, the United States is in a prime position to observe and learn. By monitoring the impact of these rate cuts, we can make a well-informed decision about when to adjust our own rates, minimizing risk and optimizing benefits.

The big question now is: will the U.S. follow suit? Only time will tell, but one thing is certain—staying informed on these developments is crucial for navigating the ever-changing economic landscape.

Blockbuster Jobs Report Causes Rate Spike 🚀

Last week was looking promising, with mortgage rates dipping into the high 6% range for most loan types. However, everything changed on Friday with the release of the May jobs report. The report showed a surprising addition of 272,000 jobs, far above the expected 180,000. As a result, rates spiked immediately.

The Fed has made it clear that their decision to cut interest rates depends heavily on economic data. They want to see inflation close to their 2% target and signs of a cooling economy. With such a robust jobs report, it's tough for the Fed to justify a rate cut this month. How can they cut rates when the job market appears to be thriving? But is it really thriving? 🤔

After taking a closer look, I noticed that the recent job growth is mainly driven by part-time employment. This surge in part-time jobs gives the illusion of a strong job market. Over the past year, we've actually lost 1.2 million full-time jobs, which have been replaced by 1.5 million part-time positions. So, while the job market might seem hot on the surface, the reality is that millions of Americans are juggling multiple jobs just to get by.

It's Fed Week! 📅

This week is set to be a big one, with the CPI Inflation data and the Fed press conference both scheduled for Wednesday. The recent strong employment report has ramped up the pressure on the CPI data. If inflation spikes again, we can expect rates to increase. On the flip side, if inflation drops, we might see the market rally and mortgage rates decrease.

One thing is clear: a rate cut announcement is highly unlikely during this Fed meeting. However, we'll be paying close attention to the updated "dot plot" from the Federal Reserve. The "dot plot" shows each Fed member's projections for the Fed Funds Rate for the end of the year and the coming years. With the mixed economic data we've been seeing, it will be interesting to see their projections. It's a challenging situation, and it's evident that predicting the economy's direction is more complicated than ever. 😬

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