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Fed Minutes Released

February 23, 2024

This past week interest rates ticked up to the highest level of the year, as the Minutes from the Fed's last meeting were released. Let's discuss what happened and look at the week ahead.

Fed Meeting Minutes Released

Last week's main event was the release of the Minutes from the January Fed meeting. Fed Chair Powell made it clear that a rate cut in March was not their "base case". Upon the Minutes being released, it became clear it was the same sentiment amongst most Fed members.

Most Fed members agreed they need to proceed carefully on cutting rates and not do it too soon as inflation remains above their intended 2% target.

Yet, at the same time, some Fed officials expressed concern about keeping rates too high for too long. This lack of consensus and mixed messaging highlights the uncertainty surrounding where inflation and the economy are headed, and when rate cuts are coming.

As always, the Fed reiterated they will be data-dependent and will rely on incoming inflation and economic readings to determine if and when to cut rates. The market is currently pricing in a rate cut this June, which is a lot different from a March cut priced in just one month ago.

So overall the Fed confirmed what we knew back in January - rate cuts are off the table for now and they need to see more disinflation for the Fed to move rates lower. But there was one note that could help long-term rates like mortgages in the future.

"Noting reductions in overnight reverse repo usage many officials said it would be appropriate to start in depth balance sheet reductions at next meeting." FOMC Minutes Feb 21 2024.

The Fed's balance sheet reduction is another form of tightening monetary policy, and it is a reason why long-term rates, especially mortgages, are higher. If the Fed starts to slow balance sheet reduction, it could lead to stabilization and possibly improvement in long-term rates.

Debt Everywhere

As mortgage and housing professionals, we must watch events around the globe. On Wednesday, during a day with not much news here outside the Fed Minutes, a German bond auction went off poorly and caused rates around the globe to rise.

Shortly thereafter, our Treasury Department sold $16 billion worth of 20-year bonds, and that auction also went off poorly… meaning investors needed to be compensated with more yield to buy the bonds. As those rates move higher, it causes mortgage rates to move higher as well.


The Conference Board's Leading Economic Indicator report showed the U.S. slowed quickly between December and January, highlighting the uncertainty around the strength of the economy. On one hand, we have strong labor market data, and on the other, we see numbers that suggest recession threats rising.


The 10-year Note has a yield existence at 4.32%, which held yields from going higher the last week or so. If that level holds, it will keep long-term rates from moving higher. The opposite is true.

Bottom line: Uncertainty exists in the financial markets as to the strength of the economy and when the Fed will be able to cut rates. This means in the near term, any improvement in long-term rates may be short-lived. Upon clear data and direction, we will see further stabilization in interest rates.

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