The Fed is Already Disobeying Orders! Does it Even Matter?

It’s Fed Day, and The Fed just made their announcement. The market has been expecting that The Fed was going to pause on the Fed Funds Rate reduction, and that’s what happened. Of course, there has been a lot of talk from the current administration that they are going to pressure him to reduce rates.

The Fed is supposed to be neutral when it comes to politics… I don’t know how true that ever is. I even saw a headline come across CNBC that said The Fed hadn’t even had any contact with the president. Who knows what that means?

An Interesting Perspective About This Situation

The thing that strikes me about this situation is when I think about how The Fed has already dropped 1 point over 3 separate drops. But all we’ve seen with mortgage rates is that things are going up. It’s another reminder: the bond markets are going to do what they are going to do, regardless of what The Fed does.

There should be some correlation there, and at some point, there probably will be. In the prepared statement right after today’s meeting, they said that they are concerned that inflation is going in the wrong direction. In the last couple of reports, it has been moving in the wrong direction. There is another report on Friday, and who knows what to expect with this one.

The Fed has come out and said that they get the inflation data 24 hours before everyone else, which is technically tomorrow. But it makes me wonder if there is something in Friday’s number that we should be aware of (if they are worried about inflation heading in the wrong direction).

The Fed Funds Rate and Mortgage Bond Markets aren’t Moving Together

Long story short, The Fed is going to make their decisions. At the same time, the gigantic multi-trillion dollar mortgage bond market is also going to do what it’s going to do. And it doesn’t have to run the same as what The Fed does. Even though they aren’t moving together right now, there is a possibility of them lining up again in the future.

We’ll see what happens. I’ll be watching the upcoming inflation numbers and job reports over the next week and a half. Those are the things that are really going to make a difference. So, keep an eye out for that information to come.