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Weekly Mortgage Rates
March 25,2025
The Fed sticks with “wait and see” mode but there is a silver lining
The Fed meeting was the key event last week. The release of the SEP (Summary of Economic Projections) showed a shift towards a more negative outlook from the last time we had of the projections in December. The latest projections show slower economic growth and higher inflation expectations.
The inflation forecast increased from 2.5% to 2.8% for the year and also the unemployment forecast increased from 4.3 to 4.4%. They also decreased their GDP forecast for 2025 from 2.1% to 1.7% growth for the year. The economic projections also showed no change in rate cuts for 2025 with the majority expecting two rate cuts later this year. Wait-and-see mode continues.
The silver lining- The Fed announced that they will slow the treasuries they are allowing to enter the market from their holdings from 25 billion a month, down to 5 billion. This is rate friendly because it puts less bond supply in the market that has to be absorbed.
Stagflation - but with a small ‘s’
“I say stagflation with a small ‘s,’ not a capital ‘S.’ Those of us who are old enough to remember the late ’70s and early ’80s—this is not the stagflation of those years.”- Jay Bryson, Wells Fargo chief economist.
“Revisions to FOMC members projections had a somewhat stagflation feel with forecast for growth and inflation moving in opposite directions.”- Goldman Sachs after the FOMC meeting.
Months ago, when Powell said “I don’t see the Stag or the Flation” we figured there would be an opportunity to bring it up again. At the most recent meeting he echoed this same sentiment, dismissing the comparison to the 1970’s and he is not wrong. We are seeing a softening in the economy, with inflation still stubborn. But it is very mild right now and only some of the softer data points show economic weakness to date. The concern is of course that the data won’t remain mild, and that uncertainty is what is driving markets now.
If I stay there will be trouble, if I go it will be double
The Clash lyrics are appropriate here. There is a lot of hand wringing about the Fed waiting too long to act as they did when they described the pandemic inflation as ‘transitory.’ If they keep policy and rates as restrictive as they are now, the economy could worsen further. If they move to lower rates, it could cause inflation to flare up again, and we know how hard that fire is to put out. It is quite the predicament. Whichever they decide is the bigger threat is what will get the attention.
“The window to cut rates for “good” reasons is closing. Meaning they can use the excuse to cut by saying inflation has come down. They can also cut because of “bad” news- the economy is worsening.“ – Nick Timaros WSJ
What’s ahead
Monday stocks had a relief rally as the White House pulled back a little extent of the April 2nd tariffs. The move caused mortgage rates to come under pressure just a bit, losing our small gain last week as some of the money that came into bonds moved back over to stocks.
This morning, we start of a bit better than yesterday due to a very weak Consumer Confidence report. Consumer expectations of the future worsened to levels usually seen during recessions.
For the rest of the week on Friday we will get PCE, our key inflation measure and any tariff noise can also impact rates this week. Rates still hanging in our trendline though, it’s a tough nut to crack.
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