The Fed’s Meeting

June 14, 2021

As we move through June, Orion’s brokers are continuing to help borrowers, and Orion fund them, regardless of what the economy is doing. It is important for Orion’s brokers know what economists and investors are watching, and how this week’s and last week’s news fits into the narrative of where our economy is going and therefore what is driving your client’s rates.

 

U.S. economic data continues to support the ongoing narrative of elevated demand bumping up against limited supply, the result of which is inflation. Consumers have pent up demand for the goods and services they didn’t purchase in 2020, and are supported by fiscal and monetary policies that are likely to remain in place through the remainder of 2021.

 

Orion’s brokers see the same thing that Orion’s management sees. Namely, a labor shortage, not a job shortage. There are “help wanted” signs everywhere, but service and hospitality businesses are having trouble attracting employees back to work, slowing the economic rebound. To spell it out, if you want to go to the local diner and have breakfast, but they don’t have the staff to be open, then what? And that scenario is being carried out in other sectors of the economy. Want to buy a car, but there are none due to a chip shortage? Want to buy a house but no one is selling?

 

Last week we learned that consumer inflation was up 5.0 percent over the last twelve months with energy, used cars, and transportation costs driving move. But unemployment claims continued to trend lower reaching a post-pandemic low of 376,000. In total, over15 million people were receiving some sort of unemployment insurance for the week ending May 22.  

 

Finally, this week is another Fed meeting. The Federal Reserve’s Open Market Committee is not expected to announce any major changes to the Fed Funds rate, although the markets are looking for guidance on when the Committee may begin scaling back special programs and asset purchases as the first phase of tightening. If the news comes that the FOMC is indeed discussing scaling back purchases of mortgage-backed securities, it will a) be expected, and b) may drive rates higher. Orion’s capital markets department will be watching closely.


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