Morning Report: The FOMC minutes show the Fed isn’t contemplating interest rate cuts

Posted on November 22, 2023 by Brent Nyitray

Vital Statistics:

Stocks are higher this morning after good numbers out of Nvidia. Bonds and MBS are flat.

The FOMC minutes showed that the Fed is not considering rate cuts. “Participants generally judged that, with the stance of monetary policy in restrictive territory, risks to the achievement of the Committee’s goals had become more two sided. But with inflation still well above the Committee’slonger-run goal and the labor market remaining tight, most participants continued to see upside risks to inflation.” Note that this meeting took place before the weak CPI number which showed Fed progress on inflation.

The minutes did mention the problems in commercial real estate, which are going to impact bank earnings as provisions for credit losses increase. A lot of CRE loans need to be rolled over next year and many of these projects cannot be refinanced unless LPs put up more capital. If the LPs refuse, the real estate goes to the banks.

Mortgage applications rose 3% last week as purchases increased 4% and refis rose 2%. “U.S. bond yields continued to move lower as incoming data signaled a softer economy and more signs of cooling inflation. Most mortgage rates in our survey decreased, with the 30-year fixed mortgage rate decreasing to 7.41 percent, the lowest rate in two months,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications increased to their highest level in six weeks, but remain at very low levels. Purchase applications were up almost four percent over the week, on a seasonally adjusted basis, as both conventional and government purchase loans saw increases. The average loan size on a purchase application was $403,600, the lowest since January 2023. This is consistent with other sources of home sales data showing a gradually increasing first-time homebuyer share.”

Consumer sentiment fell in November, according to the University of Michigan Consumer Sentiment Survey. Expectations about future conditions remain dour. Unfortunately, consumer expectations for inflation rose again, with consumers seeing year-ahead inflation coming in at 4.5%, which was the highest since April. Long-run expectations rose to 3.2%, the highest since 2011. We know the Fed pays close attention to the inflationary expectations number.

Durable goods orders fell 5.4% in October, according to the Census Bureau. Transportation drove the decrease. If you strip out transportation, durable goods orders were flat. Capital goods orders (a proxy for business capital expenditures) fell 0.1%. All of the durable goods numbers came in below expectations. Separately, Initial Jobless Claims fell to 209k.

Filed under: Economy |

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19 Responses

  1. jnc4p's avatar
    jnc4p, on November 22, 2023 at 11:54 am said:

    Another good piece about photo editing choices of the MSM during war.

    https://patrickwitty.substack.com/p/this-photograph-demands-to-be-seen

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  2. jnc4p's avatar
    jnc4p, on November 22, 2023 at 12:29 pm said:

    And another anti-Trumper tries to convince me to vote for Trump:

    “Trump is a philosopher of “fuck you-ism,” with no plan, no vision and no hope for anything beyond his promises of vengeance. There is something important to remember about those types of promises. There has never been a person who promised them who achieved political power and didn’t deliver on it. Ever.”

    https://steveschmidt.substack.com/p/take-donald-trumps-promises-of-vengeance

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  4. jnc4p's avatar
    jnc4p, on November 23, 2023 at 2:07 pm said:

    Peak 2023:

    “Louisville bank shooter killed 5 people to highlight gun laws, police report shows

    By Anumita Kaur and Robert Klemko
    November 21, 2023 at 10:44 p.m. EST”

    https://www.washingtonpost.com/nation/2023/11/21/louisville-shooter-connor-sturgeon-report/

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