Inflation Cooling? Turning Point for Rates?

Question

This Thursday we saw a massive improvement in mortgage rates (Mortgage News Daily screenshot below) after better-than-expected inflation data from October. Do you think this is a turning points for the Fed to slow down their aggressive rate raising strategy? I'm hopeful that inflation will continue to tick down for the next few months, which will allow the Fed to ease up.

Those who have been on the sidelines for the last couple of months, may want to consider making moves in the coming weeks. With prices down, sellers willing to negotiate, and rates potentially on a down-trend, this could be the ideal time to make some purchases (wefore everyone else catches on)

What are your thoughts?

Peter Tverdov · Answer

I fully expect the FED to raise rates at least 2 more times. The indicator will be if its 50 or 75 bps. 50 would indicate to me that they don't feel the need to be as aggressive. It takes 6 months usually for FED rates to affect the economy so we're still going to see a lot of bumps in Q1 and Q2 2023 before things start to shake out. When they get to the point where they stop raising and just hold, you might see mortgage rates peel back a bit but I don't see 4% interest rates again for several years.

John Woodhouse · Answer

Wow! I wasn't under the impression that rates were going down anytime soon! I'd heard that they needed to get all the way up to 20% to cool down inflation effectively, so I'm very surprised that they would start lowering rates already.