What The FOMC Did

The Committee raised the target range by 25 basis points to 3.75 to 4.00 percent, on a 12-0 vote. No dissents. That unanimity matters more than the hike itself. When you get a clean 12-0 on a tightening move with core PCE running 3.34 percent (July) and headline CPI at 3.71 percent (August), the Fed is telling you it views inflation, not growth, as the binding constraint.

The statement language is the tell. "Inflation remains elevated." "Today's policy action will support a timelier return to the Committee's 2 percent goal." And the closer: "The Committee will deliver price stability." That is not the language of a Fed near the end of a cycle. That is a Fed signaling it is willing to keep going. They also described activity as "expanding at a solid pace," domestic spending as "resilient," and unemployment as having "changed little" against the actual 4.1 percent print for August.

Where The Market Disagrees

Here is the gap. The 10-year closed at 5.00 percent on September 15, up 20 basis points week over week, while the 2-year sat at 4.67 percent. That leaves the 2s10s slope at positive 33 basis points. If the market genuinely believed this hike was the start of a sustained campaign that would break the economy, you would expect the front end to lead and the curve to flatten or invert. Instead the long end is doing the work.

That is a term premium story, not a growth-fear story. The 10-year at 5.00 with a 4.00 upper bound funds rate says the market is pricing more inflation risk and more supply into the belly and long end, not an imminent recession. I want to flag plainly: fed funds futures probabilities for the next meeting are not in this data pack, so I am not going to assign a number to the October or December odds. What I can read is the curve, and the curve is not endorsing a hard landing.

Why USDJPY Matters

USDJPY printed 153.71 on September 11. A dollar this firm against the yen is consistent with rate differentials staying wide and US real yields holding up. For mortgage rates the transmission is indirect but real: a strong dollar and elevated long-end US yields keep foreign demand for Treasuries price-sensitive, and every basis point of term premium in the 10-year feeds into MBS pricing. Watch the 155 area on USDJPY as a stress marker for intervention chatter, which can whip long-end volatility.

Mortgage Rate Translation

Freddie PMMS printed 6.76 percent for the week ending September 10, up from 6.71 the prior week and 6.65 four weeks ago. So the 30-year is grinding higher, up 11 basis points over four weeks, before this hike fully feeds through. With the 10-year at 5.00, the primary-secondary spread is doing borrowers a favor keeping the note rate under 7. If the 10-year holds near 5.00 and volatility stays contained, with VIX at 17.2 and high yield OAS at just 2.76 percent, I would not expect a spread blowout. Credit is calm. The problem is the level of rates, not the risk premium.

Housing Data Check

The demand destruction is already visible. Housing starts came in at 1.239 million for July, down 13.5 percent year over year. Existing home sales ran 3.98 million in August. Those are recessionary housing numbers layered on top of a Fed that just tightened. This is the tension: the Fed is fighting an inflation print while the rate-sensitive part of the economy is already contracting.

What I'd Actually Do This Week

HELOC borrowers. Your rate is tied to prime, which just moved up with the funds rate to a 4.00 upper bound. If you are carrying a variable balance, price out a fixed-rate second or a term-out. The Fed statement is not promising you relief.

DSCR investors. With the 10-year at 5.00 and PMMS at 6.76, your coverage math is tighter. Run deals at today's rate, not a hoped-for refinance. If the numbers only work assuming a cut, the deal does not work.

Sub-4 percent first mortgage holders. Do nothing to that first lien. You are holding an asset. If you need cash, structure around it with a second, do not refinance the whole balance into a 6.76 handle.

Sideline buyers. Starts down 13.5 percent and sales at 3.98 million mean less competition and more seller flexibility. If you find the house, buy the house and plan to refinance later. Rate is a variable, house is fixed.

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*Research and education only, not personalized advice, not a rate lock commitment. NMLS #2636410. West Capital Lending, Inc. NMLS #1566096. Equal Housing Opportunity. For a binding rate quote, contact your loan officer.*