Fed decision looms over the market
With Friday’s Consumer Price Index (CPI) release on deck, financial markets are watching closely ahead of the Federal Open Market Committee’s (FOMC) September 15–16 meeting. CME FedWatch priced in approximately 70% probability of a rate hike at that meeting as of Thursday.
With rate relief elusive, Melissa Cohn, regional vice president at William Raveis Mortgage and a 44-year industry veteran, is putting forward an argument that cuts against conventional expectations: a Fed rate hike could actually push mortgage rates lower.
Her reasoning is rooted in bond market psychology. Inflation remains well above the Fed’s 2% target, and Cohn argues that a decisive move to tighten would signal to bond traders that the central bank is serious, restoring confidence in longer-dated Treasurys and pulling yields down with it.
“A rate hike would probably be necessary, and I believe that when or if the Fed does raise rates, they’ll put their money where their mouth is about fighting inflation,” Cohn said.
August’s payrolls report came in above consensus at 162,000, with prior months revised upward, but the strong employment print did little to shift hike expectations.
