Orion’s management continues to remind our brokers that the Federal Reserve does not set mortgage rates. But the same factors influence the Fed’s thinking impact the bond market, and therefore mortgage rates.

Federal Reserve officials recently declared their willingness to push interest rates higher to tamp down inflation pressures, raising fears that policy makers will stay “hawkish” (e.g., aggressive) longer than previously expected. Meanwhile,yields on the benchmark 10-year U.S. Treasury note rose to their highest in more than a month following an auction Thursday of 30-year bonds that saw weak demand. Mortgage rates and prices are a function of supply and demand, so investors follow these indications with great interest. But let’s return to the Federal Reserve and the actions of its Federal Open Market Committee.

Earlier in February the FOMC hiked 25 basis points (.25 percent), as expected, lifting thefunds rate target range to 4.5-4.75%. The post-meeting statement’s forward guidance that “ongoing increases…will be appropriate” was left unchanged, indicating at least another two 25bp hikes. The statement’s inflation language was softened some to note that inflation had “eased somewhat.”

While Fed Chairman Powell’s assessment of financial conditions and market pricing of the Fed have been “dovish” (e.g., unaggressive), Orion’s management has noted that hisremarks about the near-term path for policy have been more balanced after the meeting. He stood by the statement’s language that ongoing hikes will be appropriate. He was also concerned about the risk of doing too little, and he doesn’t want to find out in six to 12 months that they were “close but didn’t get the job done.”

The out come of FOMC meeting didn’t change analyst’s Fed outlook. So we can still look for afinal 25bp hike of the cycle at the next meeting, and then the Fed remaining on hold for a year. Or perhaps two more short-term rate hikes if labor market performance doesn’t soften materially by the time of the March meeting.

Federal Reserve Chairman Jerome Powell reiterated the committee’s belief that ongoin grate increases would be appropriate. However, he maintained that the disinflationary process was underway. The dovish statement on the current trend of inflation suggests investor speculation of a lower terminal rate may ultimately be correct.

With all ofthis as a backdrop, Orion continues to focus on offering the best products and service to brokers so that you can offer them to your clients! And as we edge toward spring and summer’s “purchase season,” we continue to believe our attention to these will be a huge benefit to you, our client.

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