{"id":83228,"date":"2025-12-08T17:12:01","date_gmt":"2025-12-09T01:12:01","guid":{"rendered":"https:\/\/www.redfin.com\/news\/?p=83228"},"modified":"2025-12-08T17:13:06","modified_gmt":"2025-12-09T01:13:06","slug":"weekly-economics-update-december-8","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/weekly-economics-update-december-8\/","title":{"rendered":"Redfin Economists\u2019 Weekly Take: Fed Poised to Make Expected Rate Cut, But 2026 Projections Could Jolt Mortgage Rates"},"content":{"rendered":"

This Week In A Nutshell<\/h3>\n

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Markets expect the Fed to cut interest rates by 25 bps when they meet on Wednesday, meaning the cut itself will have little effect on rates. But a number of dissents are expected and they will also release formal projections for 2026. Those projections, along with the tone of Chair Jerome Powell\u2019s comments at the press conference, could make rates volatile.\u00a0<\/span><\/p>\n

Upcoming Attractions<\/h3>\n

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Fed meeting and press conferences (Wednesday): <\/b>A 25 bps cut is almost certain at this point since the Fed likely would have leaked details to the press in the last few days if they were unlikely to do as markets expect. The meeting will be contentious with several regional bank presidents dissenting in favor of holding rates constant. What might move rates is how their 2026 projections compare to market expectations, which currently includes two cuts. Economists expect the Fed to project one cut in 2026 and one in 2027.<\/span><\/p>\n

Job openings and quits data (Tuesday):<\/b> Delayed data for October is expected to show a small decline in job openings<\/span><\/p>\n

Fed speak (Friday): <\/b>Three FOMC officials are speaking, including Chicago Fed President Austan Goolsbee, a current FOMC voter<\/span><\/p>\n

Last Week\u2019s Highlights<\/h3>\n

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ADP jobs report <\/b>showed the private sector shedding more jobs than expected. In the absence of official jobs data until next Thursday December 18 when we will get the October job creation number and November jobs reports (including job creation and unemployment rate), it\u2019s difficult to know how much weight to put on the ADP report.<\/span><\/p>\n

Core PCE inflation<\/b> came in largely as expected based on CPI\/PPI data, showing inflation firming in September above the Fed\u2019s target, but not increasing as much as economists expected in the spring given tariff levels.<\/span><\/p>\n

Diving a Little Deeper: <\/b>Last week, it became clear that current National Economic Council Director Kevin Hassett is the front runner to be the President\u2019s nominee to succeed Jerome Powell as Fed Chair in May 2026. A formal announcement is expected in January, but the news reports are likely intended to test the waters for his candidacy. While the Fed Chair is often portrayed as setting interest rate policy, the reality is more nuanced. In order for a Fed Chair to be successful in guiding monetary policy, s\/he must have the confidence of both their fellow FOMC colleagues and financial markets.<\/span><\/p>\n

The Fed Chair is but one of twelve votes on the <\/span>Federal Open Market Committee<\/span><\/a>, which includes all seven governors on the Federal Reserve Board and the five regional bank Presidents (out of twelve total) who vote in a given year. Historically in the US, the Chair has always voted with the majority, but that need not be the case going forward and is sometimes not the case at foreign central banks. The Chair must have the confidence of a majority of the other FOMC voters in order to have outsized influence on interest rate policy.<\/span><\/p>\n

The Federal Reserve only directly sets the Fed Funds Rate, an overnight lending rate, which influences, but does not determine long term rates such as mortgage rates. Mortgage rates are priced off of ten year treasury yields, which are determined based on investors\u2019 expectations for economic growth and inflation over the next ten years. Mortgage rates can move in the opposite direction of short term rates like the Fed Funds rate, if investors believe, for example, that the Fed is cutting too much and risking higher inflation in the future. This trade off between short term and long term outcomes is why the Fed\u2019s independence is so critical. One recent example of the effect of eroding the Fed\u2019s independence was on July 16 when Bloomberg reported that the President intended to fire the Fed Chair. Long term rates increased while short term rates fell on the news until the President dismissed the report as inaccurate.<\/span><\/p>\n

Redfin Housing Market Reports<\/h3>\n

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