Uncertainty grows around Fed interest rate policy as key report is delayed
As Washington’s budget stalemate persists and political recriminations escalate, concerns are mounting over the ripple effects of the government shutdown, now entering its third day.
The Senate reconvenes today for another vote that could potentially reopen the government. Absent a breakthrough, the shutdown is poised to extend into next week.
The uncertainty - particularly its impact on ordinary Americans - is testing the patience of homebuyers. Earlier expectations of a guaranteed Federal Reserve rate cut this month have been tempered by speculation that a protracted shutdown could prompt the central bank to proceed more cautiously on interest rates. With key labor market data now delayed, policymakers are left with diminished visibility into the trajectory of the U.S. economy.
Markets are currently pricing in a near-certain rate cut at the Fed’s next meeting, but hopes for additional cuts later this year have been put on hold, at least for now.
“Slowing job growth, persistent inflation, and now a data blackout complicate the Federal Reserve’s next move,” said Sam Williamson, senior economist at First American.
“The delay of September’s jobs report, which was scheduled for release this morning, leaves the Fed without its most important labor market signal as it prepares for its late-October meeting. If the shutdown continues, inflation data and other releases could also be postponed, further narrowing the Fed’s view of the broader economy.”
This uncertainty casts a shadow over brokers. While the Senate standoff is unlikely to have a significant short-term impact on mortgage rates, potential loan delays, backlogs and reduce consumer confidence amid uncertain economic conditions all stand to hurt clients.
For one broker, who requested anonymity, the political finger-pointing by the Department of Housing and Urban Development (HUD) is an “embarrassing” reflection of the current state of affairs.
“I haven’t checked HUD.gov today, but I know that the day after the shutdown there was a message essentially blaming the other side,” he told Mortgage Professional America. “It’s embarrassing for me as someone who lives in the United States. That message, regardless of my political stance, doesn’t represent me. It’s disheartening. Ultimately, consumers will bear the brunt of this upheaval.”
He added: “It makes me question whether the government actually cares about the people whose lives are being upended, with no clear indication of when things will return to normal. Nobody knows when this will end. It’s embarrassing.”
The current shutdown, now stretching into its second week, has already begun to reverberate through the housing market. Federal agencies that underpin much of the mortgage ecosystem - such as the FHA, VA, and USDA -are operating with skeleton staffs or have suspended new loan processing altogether.
