So should growth hang in there, inflation prove stickier, it could be some time before mortgage rates meaningfully offer relief.

Well, the Fed held rates steady today. No big surprise there. But with strong economic numbers, persistent inflation pressures, and growing political noise, no change does not exactly mean no story. Marta, the Fed stood its ground today despite very public pressure from the White House and some mixed signals across the economy. I'm curious, do you see this move as a vote of confidence in the recovery or more of a cautious pause given all the unknowns still out there?

I'd say the tone was broadly cautious. Now it's very noteworthy, though, that we did have two dissents, governor Waller and Bowman. Waller, in particular, has been making the argument that the labor market is weaker than it appears, and the Fed ought to be cutting now. But, of course, the broader committee still waiting for that clarity on the labor market and also waiting for clarity around inflation.

And that brings us to the question everyone's asking. Did Powell leave the door open for a rate cut in September? What stood out to you in his comments, Marta?

Powell pushed back multiple times on the notion that he or the committee would front run the September decision. But he did say and kind of allude to the possibility that over the coming months, the Fed would receive a good amount of clarifying data suggesting that they might have a better sense of things then. The market continues to keep the probability of a September cut somewhere around sixty percent. I'd say broadly speaking, we're looking at a Fed that is leaving plenty of optionality out there.

Yeah. So the door is open, but no guarantees. While inflation and tariffs, Marta, have dominated the headlines, I want to go a little bit deeper. What's happening under the radar in the labor market or supply chains that might catch people by surprise in the second half of the year?

One thing that's coming up repeatedly is the last inflation print, actually. And while the headline number is largely benign, folks noticing that areas of core goods were seeming to show some effect of tariffs. Now I would say another observation that has been much talked about is how creative companies have been, of course, bringing inventory over pretty quickly. But, also, there's this idea that maybe supply costs and company costs aren't necessarily adjusting until company suppliers know what those final tariff rates would be. I think taking that all under consideration, I would expect the cost from tariffs to ramp up steadily over the back half of the year. But there are some good things that are happening in the economy as well. We also have a lot of capital expenditures related to AI and, of course, that trade potentially broadening out, which is something that could be supportive.

So with that in mind, if we do see that first cut in September, what do you think comes next? Could this be the start of a longer cutting cycle, or or do you see this as more of a one and done move?

Well, if this inclination of mine is correct that this is something that is gonna play out over the course of time And if we see growth hang in there, then we could start to see more sporadic rate cuts than any sort of deliberate and consistent rate cutting campaign.

And with borrowing costs still elevated, what's the risk that consumers start to pull back more noticeably?

Well, there are some consumer loans like auto loans that are a little bit more short term in nature. So if we do see the Fed cut rates, there could be a modest element of relief there. But other rates like mortgage rates key off the longer end of the curve, the ten year in particular. And it's unclear that those longer term rates would fall even if the Fed begins to lower rates. For by way of example, after the Fed embarked on its rate cutting campaign last year, long term yields actually edged higher a touch. That longer end really depends on growth and inflation expectations over time along with any term or uncertainty premium. So should growth hang in there, inflation proves stickier, it could be some time before mortgage rates meaningfully offer relief.

Marta, as always, thanks for the sharp insights and perspective. And for everybody watching, quick reminder for you. Friday brings the latest jobs report, a key piece of the puzzle for both the Fed and markets. And, of course, we'll be back right here Friday morning with Marta's take on those numbers. We'll see you then.

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