Mortgage Rates Today, Aug. 23, 2024: Powell Speaks

In brief

Update 1:00 PM ET: Powell's speech was good for mortgage rates. He declared significant progress toward reducing inflation and signaled it's time for rate cuts. Markets are reacting positively to his comments.

"Investors around the world will turn their attention today to the great American West, with Federal Reserve Chair Jerome Powell due to speak in Jackson Hole, Wyo. at 10 a.m. ET. With an interest-rate cut likely on the horizon, traders are looking for Powell to offer a rough road map of how quickly officials will bring down rates from a two-decade high."

So wrote Caitlin McCabe in her Markets A.M. e-newsletter for The Wall Street Journal this morning. Expect investors globally to be trading in bonds, stocks, currencies and commodities based on their interpretations of Mr. Powell's words.

So, please don't underestimate how important today's speech could be (though not necessarily will be) for mortgage rates. Read on for more.

Coming up

This morning's Fed speech

Don't expect Mr. Powell this morning to come right out and promise a half-point or quarter-point cut to general interest rates on Sep. 18. That's not how he or past Fed chairs work.

Instead, investors will look for hints in the content and tone of his speech.

For example, an emphasis on concerns about employment and the wider economy might suggest that a half-point cut is on the cards. But, if he appears to focus on lingering inflation worries, investors might believe that a quarter-point cut is more likely.

The Fed always says that its rate decisions are entirely driven by economic data. But Mr. Powell might also have one eye on the history books.

If he can engineer a "soft landing," that would be very rare. And it would assure him a place in economics textbooks for decades to come. A soft landing is when a central bank manages to rein in too-high inflation without triggering a recession.

So far, the Fed is on track to achieve that. But its position is now precarious. If it cuts interest rates too quickly, inflation might re-emerge. However, if it doesn't cut quickly enough and sufficiently, we could topple over into a recession.

It's a long way down from the tightrope Mr. Powell is crossing today.

If investors can't discern a clear roadmap from this morning's speech, mortgage rates might barely move. If they think Mr. Powell favors a half-point cut, they'll likely fall. But if they interpret his words as meaning we'll get the smaller cut (or even none) next month, those rates may well rise.

By all means, watch a live feed of Mr. Powell's speech yourself. But it's market reactions that count.

So, keep an eye on media outlets with good Wall Street connections for an early idea about how mortgage rates might move today -- and perhaps for weeks to come.

Today's sole economic report

July data for new home sales is due at 10 a.m. Eastern. And that's precisely when Mr. Powell is taking to the stage.

Will anyone pay attention to what's typically a minor report when a seriously big event is happening? Who knows? But we doubt it.

Next week

Next week begins slowly and then gradually builds to a Friday crescendo. That's when July's personal consumption and expenditures (PCE) price index is due.

For some reason, markets pay more attention to the consumer price index than the PCE price index. But the Fed judges the latter its preferred gauge of inflation.

So, especially now, when the Fed is exceptionally sensitive to rising prices, the PCE price index could prove crucial to mortgage rates.