{"id":84417,"date":"2026-03-16T15:42:54","date_gmt":"2026-03-16T22:42:54","guid":{"rendered":"https:\/\/www.redfin.com\/news\/?p=84417"},"modified":"2026-03-16T15:42:54","modified_gmt":"2026-03-16T22:42:54","slug":"weekly-economic-update-march-16-2026","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/news\/weekly-economic-update-march-16-2026\/","title":{"rendered":"Redfin Economists\u2019 Weekly Take: Rates Will Jump Around As Markets Weigh Iran War and Fed Outlook"},"content":{"rendered":"

This Week In A Nutshell<\/b>: We\u2019re expecting rates to continue bouncing around this week, as the Middle East conflict continues into its third week with no clear off-ramp and markets anticipate the upcoming Fed meeting.<\/span><\/p>\n

Upcoming Attractions<\/b><\/p>\n

Markets will once again be focused on the evolving situation in the Middle East, particularly whether the White House can find a way to contain the disruption to energy markets. Fed Chair Jerome Powell\u2019s second-to-last FOMC meeting is on Wednesday. They will hold rates steady, as markets expect. They will release new projections for rate cuts this year as well as inflation and the unemployment rate.<\/span><\/p>\n

\u00a0Given the Iran war, investors will be particularly interested to see if they continue to project one rate cut this year, and how they characterize the effect of recent energy price spikes on the inflation outlook. Finally, there will be February PPI (producer price index) data on Wednesday. PPI data, in conjunction with last week\u2019s CPI data, make up almost the entirety of the PCE (personal consumption expenditures) measure of inflation, which is what the Fed tracks but is released later in the month.\u00a0<\/span><\/p>\n

Last Week\u2019s Highlights<\/b><\/p>\n

\u00a0Rates continued to <\/span>march up<\/span><\/a> last week as investors worried about the inflation ramifications of the Iranian war. While February CPI data showed inflation steady, the report was largely ignored by markets since it was collected pre-Iran war.\u00a0\u00a0<\/span><\/p>\n

Diving a Little Deeper<\/b><\/p>\n

\u00a0More than two weeks into the Iran war, mortgage rates have jumped from about 6% to 6.36% today after briefly touching 6.41% on Friday. Similarly, the underlying ten year Treasury yield has steadily climbed from just under 4% to 4.22% today after a high of 4.28% on Friday. What should we expect going forward and how will the conflict affect the Fed\u2019s policy path?<\/span><\/p>\n

The Fed\u2019s playbook for an oil price shock is to \u201clook through\u201d the inflation effects in favor of the adverse effects on economic growth. We expect that Powell will get lots of questions on Wednesday at the Fed press conference on whether he expects the Fed to follow that path. Oil shocks are stagflationary for the economy, meaning both higher inflation and lower economic growth\/higher unemployment. Goldman Sachs\u2019 economists increased their year end forecast for headline inflation by 0.8 percentage points to 2.9%, but only increased their forecast for core inflation, which excludes energy prices and is what the Fed bases monetary policy on, by 0.2 percentage points to 2.4%. At the same time, they have lowered their forecast for GDP growth by 0.3 percentage points to 2.2% and increased their forecast for the unemployment rate by 0.1 percentage points to 4.6%.<\/span><\/p>\n

If the Fed follows their playbook, then we should expect roughly the same number of rate cuts, but timing also matters. With greater uncertainty and as the economic impact of this war plays out, the Fed is almost certainly less likely to cut this summer. We see that reflected in the Fed Funds futures market whether expectations for a summer rate cut have all but disappeared these past couple of weeks.<\/span><\/p>\n

In addition to the economic fundamentals and traditional monetary policy response, however, rates are moving on sentiment. Investors remember how the Russia\/Ukraine war started brought about energy price shocks that then led to an outsized battle with inflation. The economic context back then was entirely different, however, with pandemic-era stimulus and supply chain disruptions all amplifying the effect of oil price volatility.\u00a0<\/span><\/p>\n

Redfin Housing Market Reports<\/b><\/p>\n

Iran Conflict Stalls Big Purchases Like Homes and Cars For 1 in 4 Americans; Most Are Undeterred<\/b><\/a><\/p>\n