Fed Day – The Daily Tearsheet

Vital Statistics:

Stocks are higher as we await the Fed decision. Bonds and MBS are up small.

The Fed decision is due at 2:00 pm today. They are not expected to make any changes to rates, however we will get a new dot plot and a fresh set of projections.

At the December meeting, the Fed saw 2025 GDP growth at 2.1%, unemployment at 4.3%, PCE inflation at 2.5%, and was forecasting 50 basis points in rate cuts. As of now, the Atlanta Fed GDP Now model sees -1.8% growth in Q1, and the Fed Funds futures see 50 basis points in rate cuts this year.

Jerome Powell will have a press conference afterward. Expect the press to focus on tariffs and their expected effect on inflation. Tariff uncertainty will probably force the Fed to err on the side of tight policy, however shelter has been the big driver of inflation and it is falling. The labor market seems to be weakening as well, and government spending will contribute less to growth than it did in the past.

Nick Timaros of the WSJ expects the Fed to signal one or two cuts this year.

Industrial Production rose 0.7% MOM in February, according to the Federal Reserve. Manufacturing output rose 0.9% and capacity utilization improved to 78.2%.

Mortgage applications fell 6.2% last week as purchases increased 1% and refis fell 13%. “Mortgage rates increased for the first time in nine weeks, with the 30-year fixed rate rising to 6.72 percent. This increase in rates led to a decrease in refinance volume. However, purchase application volume inched up to its highest level in six weeks, led by a 3 percent increase in FHA purchase applications,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “Overall, purchase application volume is up 6 percent compared to last year at this time. Growing inventories of homes on the market and steadier mortgage rates are supporting homebuying activity thus far this spring.”

Interest rates rose last week for the first time in over two months. Still it looks like this year’s Spring Selling season is looking better than the last couple of years.

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