Morning Report: Jackson Hole recap

Vital Statistics:

Stocks are higher this morning on no real news. Bonds and MBS are up.

We have a heavy week of data coming up with home prices and consumer confidence on Tuesday, GDP on Wednesday, the PCE Price Index on Thursday, and the jobs report on Friday. The PCE Price Index (the Fed’s preferred inflation measure) will be the most important number this week followed by the jobs report on Friday.

Jerome Powell’s speech at Jackson Hole last week didn’t break any new ground – he basically stressed that the Fed remains committed to getting inflation down to 2% and that interest rates are restrictive. They will remain restrictive for a some time.

Bloomberg asked Philly Fed President Patrick Harker if the Fed had “destroyed the mortgage market for a generation.” Harker acknowledged that it is really tough out there, especially for first-time homebuyers who are struggling with high rates and limited inventory. He said “that’s why I think we don’t keep going with rates.” He noted that the homebuilders are doing well, and that there is a lot of multi-family inventory coming on line. Still, housing (un)affordability is back at levels last seen during the financial crisis.

While housing affordability concerns are not part of the Fed’s job description, I am sure Washington doesn’t want to see this continue, especially going into an election year. I have to imagine the administration is whispering into Powell’s ear, advocating for the Fed do something about housing.

The Atlanta Fed’s GDP Now model got a lot of mentions at the conference. It currently sees Q3 GDP growth at 5.9%, which would be the strongest growth since 1983, aside from the post-lockdown rebound. I discussed it in my latest Substack and took a close look at the numbers. Check it out and please consider subscribing.

Guild Mortgage has acquired First Centennial Mortgage, based in the Midwest. Terms of the transaction were not disclosed.

ICE and Black Knight have entered into a consent decree with the FTC that will allow their merger to close on September 5. The companies agreed to divest Empower and Optimal Blue to Constellation Software in order to alleviate antitrust concerns.