This Rate Drop Could Be Different

Rates are dropping. The economy is starting to slow. And the Fed doesn’t want to raise rates anymore.

ANALYSIS

This time could be different. Every economic report this week came in at expectations or lower. Jobs was the biggest story by far. New hires were down, and unemployment was up. Not a crazy amount. But it’s a shift. Potentially the one we’ve been waiting for.

To be blunt, the Fed does not want to raise rates anymore. Why? Because the Federal government owes record amounts of debt, and as rates climb, the government is spending hundreds of billions more on just paying the interest. These weaker economic reports gives them cover to stop raising.

And markets are starting to realize this is very likely the “peak” for rates.

WHAT’S NEXT

This does not mean we aren’t still in for a wild ride. It’s going to remain volatile. Next week, we have a plethora of interviews by Fed governors. Anything they say off message could spook markets.

On the data side, initial jobless claims come out on Thursday. If it also shows weakness in the job market, we could see another bump down.