Fed Minutes and Waller Point to More Rate Hikes, With Flexibility on Timing
Minutes released Oct. 7 show most Fed officials expect another hike by year end. On Oct. 8, Governor Waller said more hikes are likely but need not come at consecutive meetings.
By Christopher Salem · 3 min read
Why this matters: Two Fed releases in two days describe the same direction: higher short-term rates are likely before year end, but the timing is open. Mortgage rates respond to the bond market's read of that path, not to the Fed's rate one-for-one.
Cover: meeting minutes beside a rising step chart. Illustration created for mortgage.news; it does not depict a real person, property or document.
What the minutes said on Wednesday
The Federal Reserve released the minutes of its September 15-16 meeting at 2:00 p.m. ET on Wednesday, October 7. At that meeting, all participants supported raising the federal funds target range by a quarter point to 3.75% to 4%.
According to the minutes, "most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end." Participants also said they approached each meeting "with an open mind." Almost all judged that inflation risks were tilted to the upside while labor-market risks were broadly balanced.
The minutes noted that "residential mortgage rates increased a bit more than 10-year Treasury yields" between the July and September meetings. A few participants also discussed planning for possible Treasury-market stress, while noting that Treasury markets had been functioning smoothly.
What Waller said on Thursday
Governor Christopher Waller spoke on Thursday, October 8, at the Istanbul Economic Forum. In his prepared remarks, he said that if data come in as expected, "I anticipate additional hikes." He added: "The hikes do not need to come at consecutive meetings, but they should be in place in an acceptable period of time."
Waller said 16 of 18 officials projected at least one more hike this year in September, and four of them projected two. He said the views were his own, not the Committee's.
What it means for the October meeting
The next FOMC meeting is October 27-28, according to the Fed calendar. Neither document commits to an October move. Waller's comment leaves room for a skipped meeting, but it is one official's view.
Why mortgage borrowers should care
Mortgage rates are priced off longer-term bonds and investor demand for mortgage securities. A Fed hike can push them higher, lower or leave them flat, depending on what markets already expect. Freddie Mac's weekly survey showed the 30-year fixed at 7.28% as of October 1. The October 8 reading had not been released when this article was published.
The takeaway
- Expect continued rate volatility around Fed communications through the October 27-28 meeting.
- Compare written quotes on the same day, with the same points and lock period.
- If you are locked, confirm your expiration date and any extension cost now.