Many economists breathed a sigh of relief when the Federal Reserve finally announced the start of its long path to winding down its gigantic portfolio. With inflation unexplainably muted, the Fed has been able to remain “accommodative” for an extended period. Indeed this has become the third longest recovery in recorded US history. However, the economy moves in cycles, and another downturn will happen, although we don’t know when. According to experts, if the next downturn starts before the Fed “normalizes” its policies and portfolio, the tools at the Fed’s disposal to fight a recession could be very limited. Last week’s move likely marks the beginning of rates trending upward. Of course, the last few years have demonstrated how difficult predicting rates can be.
This week will likely start with rates continuing to move slowly upward. The final estimate of the second quarter’s GDP is due, and if it adjusted over 3.1%, then rates could move higher even quicker. The increase could accelerate if Consumer Confidence numbers surprise on the high side again.
-Courtesy of our in-house Senior Loan Officer Rick Lombardo (310) 435-7439 firstname.lastname@example.org at First Capital.
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