October Fed Minutes
The minutes from the Fed’s latest meeting indicate that policymakers are increasingly cautious about assuming a near-term rate cut. Although the committee has eased once, many officials noted that inflation remains stickier than expected, and that economic activity is solid enough to warrant caution. Some members urged that while they are open to easing in the future, now is not the moment to “front-load” cuts without clearer evidence of inflation moderating.
In practical terms for rates and the housing market: this means another cut in the short term is not a sure bet.
Key Takeaways from the Fed Minutes
• The Fed is not convinced inflation is cooling fast enough.
Several members emphasized that recent data shows slower-than-hoped progress on inflation, making them hesitant to commit to additional rate cuts without clearer evidence.
• Policymakers are divided on the timing of future rate cuts.
Some officials support easing if the economy shows more slowing, while others believe cutting too soon could reignite inflation; creating uncertainty and added volatility for rates.
• “Higher for longer” remains on the table if the economy stays resilient. With growth and labor demand still relatively firm, the Fed signaled it may need to keep policy restrictive longer than markets were expecting, which can keep upward pressure on yields and mortgage rates in the near term.
September Jobs Report: What It Means
The September Jobs Report came in stronger than expected, showing that employers continued to hire at a solid pace. Job gains were broad, unemployment held at historically low levels, and wage growth remained steady. This type of report sends a clear message: the labor market is still healthy, and the economy hasn’t cooled as much as the Fed was hoping by this point in the year. Strong hiring is good news for workers and businesses, but in the current inflation-sensitive environment, it can be challenging news for interest rates.
Impact on the Fed and Rates
For the Federal Reserve, this report complicates the path toward future rate cuts. The Fed needs to see convincing evidence that the economy is slowing enough to ease inflation pressures, and a strong employment report does the opposite. Markets tend to interpret these results as the Fed staying cautious or even holding rates higher for longer. As a result, bond yields often move up on strong jobs data, which puts upward pressure on mortgage rates and that did not happen this week.
Bottom line:The September report reinforces the idea that the Fed needs more time and softer data before it can confidently shift toward easing policy. The Fed Funds Futures are currently pricing in just a 30% chance of a Fed Rate Cut in December.
