Federal Reserve Chairman Powell indicate, after a recent meeting that the period of aggressive rate hikes is likely coming to an end.
Transcript:
Dave: (00:05)
Hi there everyone. Dave Barlow here with the gang from Sell for 1% Realtors, and we have, uh, Rich Cerone. And I actually, rich, I was talking to, uh, an Italian yesterday and, and correct me if I’m wrong, it’s Rich Chico. Chicone, is that right?
Rich: (00:23)
No, it should. No. Uh, David should be, it should be because you have to pronounce every vowl. That last vowl, you missed it. So it would be, you are correct to C before the E is always the CH sound. So it’s Chair-CO-Nay. Okay. You have to get that A at the end.
Dave: (00:42)
I didn’t throw the A on there. I was just Rich, chacon, , . All right. So Rich,
Rich: (00:48)
But I answer, I answered to anything. That’s the good thing.
Dave: (00:52)
So . Okay. Well anyways, we got you here this morning and thank you for taking some time. And, um, uh, we want to talk about what happened, uh, yesterday, late afternoon with the Chairman Powell and the Federal Reserve. Uh, they raised the, uh, index rate, uh, 0.25, which I think was kind of in line with what everybody was expecting. But then as he was talking, uh, the stock market started dumping and then as he kind of finished up the stock market rebounded a little bit. So can you tell us what happened yesterday with, uh, all the action?
Rich: (01:30)
Yeah, Dave, so as I’ve said, uh, before in previous meetings we’ve had, it’s not as much what the Fed does in terms of raising or lowering rates per se, as long as they stay within the boundaries of what the markets expect. But what the markets really are watching is the comments that, that the chairman says after the meeting. He indicated, uh, it, you know, in answering some questions from reporters that, um, that we may be ending, we need to come to the end of the cycle of raising rates aggressively like he’s been doing. He didn’t really get to the point where he thought rates were going to be lowered sometime in 2023, but he did signal the idea that we’re coming to the end of the rate tightening cycle. Uh, as you said, first of all, they only raised a quarter as opposed to, uh, in previous meetings they’ve been raising half and three quarters.
Rich: (02:32)
So we’re down to a quarter raise instead of a half or three quarters, which is a signal in and of itself. And then, uh, one question in particular was, uh, he was asked about the Fed funds rate. The fed fund rates currently is, is in the four and a half to 4 75 range. And somebody asked him about that fed fund rate and what he thought would be the, uh, uh, future of that, and he said he didn’t see that going above 5%. So what that means is that, you know, if if that’s the case, then there’s, then there can’t be too many more increases in the future if he’s going to keep it at under five. And we’re already at four and a half to 4, 7, 5 right now. So that was a clear signal that, you know, that the intention is to stop raising rates as, as the year wears on. So just the very fact that, that the rate hikes are going to cease is enough, even though they’re not gonna lower rates, is enough to telegraph the market that, uh, that that rates will, uh, stabilize in the future. And there may, there may come a time when they will, uh, start to lower rates as well.
Dave: (03:47)
All right. Well, that’s good news. Uh, for the overall market, um, mortgage rates, stock market, uh, reacted. Um, I’m a crypto guy and I was watching Bitcoin, uh, go up, um, as, uh, the conversation was going along. And so, uh, that’s that’s good news for the market overall, wouldn’t you say?
Rich: (04:08)
Yeah, I mean, the stock market jumped the, um, mortgage backed securities rallied. The mortgage backed securities are what, uh, the mortgage base PEG two, uh, and, uh, so we had a good day yesterday, no question about it. And, uh, it’s a good signal for, uh, for the markets and the, and the housing market going into the summer that we hopefully will see rates, uh, continue to slide down a little bit. We, uh, you know, we, we hope to get into the fives and stay there over the, at least over the rest of the summer.
Dave: (04:44)
All right, Rich, I appreciate your time. Thanks for, uh, the clarification of what was going on in the market yesterday. I know all of us realtors are, uh, always very interested in what’s happening as it impacts interest rates, uh, uh, to a certain extent. And, and, uh, your clarification, uh, definitely helps us all. Thanks again for, uh, your time.
Rich: (05:05)
You’re welcome, Dave. Thank you for having me.