Fed day preview: The hawks have already won

HousingWire

On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about his Fed day preview.   Related to this episode:   The Fed hawks are winning even without a rate hike  https://www.housingwire.com/articles/the-fed-hawks-are-winning-even-without-a-rate-hike/  HousingWire | YouTube⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠  https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q  HousingWire AI Summit – August 11  https://events.housingwire.com/AI-summit-2026?utm_source=housingwire&utm_medium=website&utm_campaign=hwd_podcast_0727  HousingWire Mortgage Banking Summit – October 1  https://events.housingwire.com/mortgage-banking-summit-2026?utm_source=housingwire&utm_medium=website&utm_campaign=hwd_podcast_0727  More info about HousingWire  https://lnk.bio/housingwire   Top 5 Trending:   The Fed hawks are winning even without a rate hike  https://www.housingwire.com/articles/the-fed-hawks-are-winning-even-without-a-rate-hike/  DFW’s next suburban growth wave is forming west of Fort Worth  https://www.housingwire.com/articles/parker-county-dfw-growth/  New York City posts notice of new tax levy to pied-a-terre owners  https://www.housingwire.com/articles/pied-a-terre-tax-appeal/  Mortgage servicers face higher costs from transfers and regulation  https://www.housingwire.com/articles/mortgage-servicing-costs-rise/  Mortgage rates move closer to 7%, but housing demand holds up ahead of Fed meeting  https://www.housingwire.com/articles/mortgage-rates-near-7/   Want more from Sarah? Don’t forget to subscribe!  https://www.housingwire.com/subscribe/   The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate.

Transcript

00:11Welcome, everyone. I'm joined today by lead analyst Logan Motoshami to give a Fed Day Preview.

00:16Before we dive in, here are the top five trending articles on HousingWire.com.

00:21First, we have Logan's article on today's topic, The Fed Hawks Are Winning Even Without a Rate Hike,

00:26followed by DFW's next suburban growth wave is forming west of Fort Worth.

00:32Then we have New York City post notice of new tax on second homes and mortgage servicers face higher costs

00:38from transfers and regulation.

00:40Finally, we have mortgage rates move closer to 7 percent, but housing demand holds up ahead of Fed meeting.

00:47All right, let's get to it. Logan, welcome back to the podcast.

00:51It is wonderful to be here. It's Tuesday morning, a day before the Fed.

00:55So this is going to be a Fed preview, but let's talk about the action today.

01:01Ten-year yield actually broke a smidge under 460. Remember, 460 was the peak forecast for 2026.

01:08And what we've seen in the last few months is that when the conflict gets really hectic,

01:15when the news gets really bad and everything, the ten-year yield on Iranian conflict 1.0 got to 468.

01:21And then we made that deal. Bond yields go down. Conflict 2.0, all the hectic stuff.

01:28We got to 4.71. Talk of a deal, ceasefire, whatever this is. Ten-year yield has come back down.

01:35And just reemphasizing our point that we've made in the podcast and the articles,

01:40it's really harder to get the 10-year yield much higher than where we are today unless the conflict news

01:46is really bad

01:47or the Federal Reserve gets more hawkish than what they're talking about today.

01:51So today's a Fed preview. By the time you all see this, it's Wednesday morning.

01:56We'll take a look. We wrote the article yesterday for everyone to kind of, you know,

02:01my take is that the Fed hawks have already won. But here we are. Let me have it, Sarah.

02:07Let you have it. Okay, so let's dig in on that. The Fed hawks have already won.

02:10So from your perspective, the whole like, are they going to raise rates? Are they not going to raise rates?

02:15It really doesn't matter because they already have what they want.

02:18They have what they want. And we're going to get like really, really William Playfair nerdy right here.

02:26The bond market does a lot of the heavy lifting for the Fed always because the bond market tends to

02:31get ahead.

02:32And it does it when the bond market thinks that the economy is getting weaker.

02:36And just remember, it's 2026. The 10-year yield has never breached under 4% unless there's an economic or

02:45labor growth scare.

02:46This is why the whole labor over inflation thing, right? Last year was a really good example.

02:50Inflation was rising. We are hawkish. We had $10 trillion of debt we had to refinance, all this.

02:56Yeah, yeah, yeah. Bond yields went lower because the data got lower, right?

02:59We had some negative jobs reports and we know what that is about.

03:03You know, Godzilla tariffs, government shutdown, all those things.

03:05But this year, the kind of exact opposite happened.

03:11When the 10-year yield broke under 4%, to me it was like peak AI.

03:17Remember AI was going to take all the jobs?

03:19Jobless claims were like at the lowest level since 1969.

03:21But in any case, that was a labor scare.

03:26And now as inflation picked up, the conflict picked up, the Federal Reserve has gotten hawkish with their language.

03:33And because of that, they kind of won already.

03:36The hawks won.

03:37They got their rate hikes already priced in on the three-month, two-year, and 10-year yield.

03:42So to me, they don't necessarily need to hike.

03:46You probably don't have enough people hiking because the labor data has actually been getting softer recently.

03:51And inflation was – the month-to-month report actually came in negative.

03:58CPI and PPR, we're going to get the PC inflation.

04:01And the conflict is, you know, whatever.

04:04That's the wild card.

04:05But, you know, they can hold off because they've already won that fight right now.

04:12So we started talking when President Trump came into office about one of his priorities being mortgage rates being lower,

04:20right?

04:20Lowering mortgage rates.

04:21And he went on a tear about that all last year.

04:24This year, he's had a lot of other things on his plate.

04:27But still, you know, ahead of this meeting, he has definitely done another full-court press saying, you know, Warsh

04:34wants to do it.

04:35But he's not sure if he can because of – what did he say?

04:38He has a board and those board members don't want to do it.

04:42But he's definitely saying Warsh wants lower rates.

04:45Trump wants lower rates.

04:46But it's hard to see a path for that.

04:50So President Trump tried to take over the Federal Reserve.

04:52Let's just call it what it is, right?

04:54You know, he worked on getting his own – I mean, Stephen Meyern was part of the Federal Reserve.

05:01The day I die, I'm still going to think Stephen Meyern was part of the Federal Reserve.

05:05In any case, Trump knows it's a numbers game.

05:08He needs more dovish people.

05:10He needs more people like Kevin Warsh.

05:12Like, why am I hashtagged, tattooed on my chest, anyone but Warsh?

05:16It's because Trump always had Warsh as the pick.

05:20Everything else was like a pony show.

05:21But the problem is that he's lost his numbers, right?

05:26Christopher Waller was a dove.

05:27Now he's a hawk.

05:29Michelle Bowman is no longer super dovish.

05:32The lone dove that Trump has on his team is Lisa Cook, and he wants to fire Lisa Cook, the

05:39one person that would line herself with the productivity gains with Kevin Warsh.

05:44It's a really crazy world we live in right now.

05:47In any case, he does not have the numbers of the votes.

05:51So, best case scenario, let's say Kevin Warsh was the plant to put in.

05:56All he could do is try to get them to hold off because he could say, hey, listen, the jobs

06:02data, ADP five weeks in a row has been softer.

06:05The last jobs report, you know, Logan Motoshami is trying to explain this to us,

06:10that the curve of the data has improved because, you know, we no longer have Godzilla tariffs to worry about

06:16and the government shutdown.

06:19All these things that usually impacts the economy for one year has gotten better, but it's not like a reacceleration.

06:25As long as wage growth doesn't take off, Kevin Warsh could probably hold them off for this.

06:29But then you go into now the next one in September.

06:32But as long as the 10-year yield and two-year yield, all these things are here, Fed won.

06:39The Fed hawks beat Kevin Warsh and Trump on this one.

06:42When oil prices were headed higher, especially when they got over 100, right, Fed hawks were definitely like,

06:47they were pointing to that as like, oh, this is, you know, this is what's happening.

06:51But now that rates are down, I mean, it's not like we're going to see a drop in the Fed

06:56funds rate because of that.

06:57That's still confusing to me.

06:59So when we originally started the conflict, the 10-year yield didn't follow along with it.

07:05Why?

07:06Because we had two to three rate cuts still priced in for the year.

07:10As the conflict went on and the data was even more inflationary, before the conflict kind of took off,

07:18the Federal Reserves went hawkish.

07:21It's rare to see something like this, but you go into, and this all happened like in the first six

07:25months of the year.

07:26We went from two to three rate cuts to two to three rate hikes.

07:30Then the conflict got worse, and then oil was above.

07:32So then all of a sudden you're like, okay, oil prices, diesel prices, food prices.

07:36This is not an environment that we cut rates in with inflation already above target.

07:41So the whole curve shifted during the conflict.

07:44And then the Austin Goolsby's and the Lori Logan's and the Beth Hammock's and all of them said, hey, guys,

07:50with the conflict here, we're also like, we're worried about this.

07:55But when oil prices fell down, nothing.

07:59I mean, Beth Hammock, homegirl, actually went out there and said, oh, no, this is bad.

08:03This is bad.

08:04If people have, Sarah Wheeler, what happens?

08:06If people have more money they're going to spend, well, that's inflationary.

08:11No.

08:12So there was no kind of enthusiasm for oil prices falling, but there were all these statements to stay hawkish.

08:20So the Hawks made this award.

08:22And let's be honest with you.

08:24Kevin Warsh for eight years just bleep posted, bleep speeches about how bad the Federal Reserve is.

08:31And now he's their boss.

08:33OK, so let me tell you, they are on the board or like you little, you know, because Trump put

08:39them in there and the Federal Reserve is being attacked.

08:41Their people are being fired, you know, all this stuff.

08:44So there is a little animosity.

08:46If you do not have a little bit of animosity to somebody that has done that to you for eight

08:51years, you're not you're not living life, man, because you wouldn't get along with a person.

08:56So there's a little bit of I don't trust you like Christopher Waller.

09:02It was reported that, hey, what are you doing with this task force?

09:05Why are we doing this?

09:06You tell me who's on your task force.

09:08I'll tell you what they're going to say.

09:09You know, so everyone does not trust Kevin Warsh because Trump put him in.

09:14So, I mean, this is just the truth of it.

09:17So the Hawks wanted to make sure to get there before, you know, some kind of rule where you can't

09:22talk about it anymore.

09:23But in any case, Kevin Warsh's job is, of course, what Trump wants is to lower rates, get mortgage rates

09:31down.

09:32But in this environment, it's very difficult for even him with the conflict going on.

09:38But, you know, before the year started, the Federal Reserve, Powell and everyone said, listen, we're just going to let

09:43the tariff inflation wind itself off.

09:45And then we'll get the, you know, last two, three rate cuts in.

09:50And that's it.

09:50The cycle's over.

09:51A lot of things have changed then, but I thought there's animosity within the Federal Reserve and rightly so out

10:00there.

10:01And it's going to be a little bit more difficult to roul up the Hawks in this environment, you know,

10:07when the president is saying we want the lowest interest rates in the world and Kevin Warsh is Kevin Warsh.

10:13So we are here.

10:16So he can hold it off.

10:17If the conflict is over by the next meeting and some of these inflation prints are not picking up in

10:24a big way, maybe he could hold them off in September as well.

10:27But, you know, again, the 10-year yield is up here.

10:29The two-year yield is up here.

10:31They won this battle for now.

10:32So from your perspective, it's already priced in.

10:35So, you know, yeah, we're not going to see a rate hike, but that's because we've already been paying the

10:40price in mortgage rates for having that hawkish stance.

10:44So you don't think – what do you think the market will do tomorrow, bond market?

10:48Well, you know, because we've already had a move lower in the 10-year yield, really, the Iranian conflict news,

10:56you know, if it's a positive news and the Federal Reserve says, hey, listen, we are – we're not hiking,

11:02but we are very, very hawkish.

11:03It's more of the same.

11:04You know, what could be a surprise is if they say that, you know, we believe we need to be

11:10more hawkish in the market.

11:12Talk to them.

11:13We don't even know if Warsh is going to say this.

11:15I mean, the whole point is not to tell the markets what they're really thinking.

11:18The whole point is to get rid of the dots.

11:20Now, I don't know if this is going to be something that starts in 2027.

11:24In 2026, we still have them.

11:26But Kevin is also not talking about his own, you know, thing.

11:30Why?

11:30Because Kevin is Trump's person, right?

11:33His job is in there to cut rates.

11:35Loyalty, man.

11:36You know, so there's a lot of X variables that we're not accustomed to.

11:40So we're all trying to feel this out on what's going to happen with the press meeting and stuff.

11:45And do we even get a dot plot tomorrow?

11:48We're going to get probably two or three sentences now, you know.

11:51So we all – it's a learning curve for all of us, Sarah.

11:55You know, even for somebody like me that religiously walks this.

11:58But all I know is that when we are above 460 on the 10-year yield and if the conflict

12:03news is not getting worse, it's really harder to escalate out of here unless wage growth picks up.

12:09If wage growth picks up, the Federal Reserve is, you know, Beth Hammock and Lori Logan cannot sleep at night,

12:16you know, if wage growth is picking up.

12:18There's just – under no circumstances can Americans make more money because they'll buy stuff.

12:23And if the oil prices are down, Beth Hammock is going to – they're going to buy more stuff, and

12:27that is inflationary.

12:30Okay, so what's the best-case scenario that could happen after this meeting?

12:34So the best-case scenario – of course, there's no rate cuts, right?

12:38We should – everyone should get the rate cuts out of the discussion.

12:42The best-case scenario is, to me, is if the Federal Reserve acknowledges that the labor market might not be

12:50as strong as they think.

12:52I know somebody wanted for me to comment on the job openings falling and S&P profits going up chart.

12:59Okay, we don't do that dual-access S&P profits, and the S&P really moves with jobless claims more

13:06than job openings.

13:06But if they – if you wanted to get an idea, if they said something about, well, the labor market

13:14might not be as strong as we think,

13:17so we're going to be open to that, labor overinflation again.

13:20If they say we'll be a little bit more patient with the Iran conflict, because we've clearly seen twice now

13:27oil prices fall right away.

13:30If they gave a nod to that, and then if they say what John Williams, the New York Fed person

13:36says,

13:37we see in the data that core durable goods inflation is winding itself off like we thought it would.

13:43That means the tariff inflation logic goes away, and you're now down to AI, electricity, and that kind of thing.

13:52So you could probably get the 10-year yield maybe fall in that environment if they make those nods to

13:58those things.

13:59But they might not say anything, so we wouldn't even know.

14:04So, again, it's – for the first time in a long time, nobody's 100% sure what we're going to

14:10get on the data side or what's going to be said.

14:13And it's kind of somewhat of a slight toss-up on do they hike or do they don't hike.

14:17I just don't think they hike just because – you can make a case for a hike, but it's just

14:22– when Christopher Waller said this inflation report is the main thing for this, and it both whiffed, you know.

14:29So it's just hard to have that and, you know, have the labor data not, like, exploding higher stuff in

14:36that manner.

14:37Well, fingers crossed.

14:39We do not need a rate hike, even if it's mostly already priced in.

14:42That just wouldn't be good.

14:43And we're still within your range for the year.

14:46Like, that's amazing, your 10-year yield range and your mortgage rate range for your forecast.

14:51Well, I mean, the forecast, the range is supposed to encapsulate everything that could happen within a year because rates

14:59don't stay in one place.

15:01They move.

15:02So they move off economic data.

15:03The slow dance.

15:04Why do we do the slow dance?

15:06You are eventually going to slow dance with me at an event.

15:09I know you're going to say no, but it eventually is going to happen.

15:12But so when we do the slow dance with a 10-year yield, what happens?

15:15Labor data gets weaker.

15:17Bond yields go up.

15:17Oh, economic data gets better.

15:19Bond yields go up or labor data yields go down.

15:22So I try to encapsulate a range between where Fed policy is at the start of the year and where

15:28neutral policy is and where Fed inflation expectations.

15:32So last year, the range mostly held is like over 98%.

15:36For this year, for the most part, 98% plus the range is held.

15:40But the Iranian conflict did show me this.

15:44I was probably going to be wrong that even if economic growth picked up and the labor data got better,

15:49we probably would not have gotten to 460 unless the Fed really, really got hawkish and the conflict happened.

15:57Because when I look at how the bond market trades, it really trades off of this Iranian conflict more now

16:04that the Fed got hawkish.

16:05So it probably would have been more difficult to get up to 460 even with the data better.

16:11So that's the new variable.

16:12But this is why we don't look away.

16:15We take the new variables and we work on it every single day, 24-7 a day.

16:19We don't run away from it.

16:20We have to incorporate it and then try to talk about what's going on with the 10-year yields and

16:25everything on that.

16:25We cannot do what a lot of people do.

16:28Hi, I'll see you next quarter.

16:30Rates are here.

16:31Hi, I'll see you once a month.

16:32No, 24-7 live.

16:33This is our job.

16:36So last year, the variable was really Godzilla tariffs.

16:39But you had a framework for that because Trump did tariffs.

16:43I think you called it the trade war tap dance in his first term.

16:48And so you were kind of thinking about that.

16:51I think the Iran conflict just sort of came out of nowhere in some ways.

16:56And as a variable, this year has been interesting because it's both affected it, but maybe not as much as

17:03people would think.

17:05You know, when we talk about oil prices, I always like to show people oil charts in 2011 to 2014.

17:13So oil prices were elevated for years.

17:17I mean, more than what we saw this year.

17:20And mortgage rates were 3.5 to 4.75 during that period of time.

17:24Why?

17:25Because the growth rate of inflation was lower.

17:27Nominal growth was lower.

17:28The labor market wasn't as strong.

17:29So you can have high oil prices and have mortgage rates lower.

17:33Headline inflation is not what the Federal Reserve focuses on.

17:36It's core inflation.

17:37I just think that you have a lot of people who do not like Kevin Walsh.

17:42You have a lot of people who know Trump put Kevin Walsh in there to cut rates.

17:46The Federal Reserve is being attacked as an institution.

17:49So you have all the members here.

17:50Your leader out there was, you know, attacked every single day.

17:53And now the conflict happened.

17:55And you're like, hey, the conflict, man.

17:58High oil prices, diesel prices.

18:00I don't know.

18:00Like Austin Goolsby in his smirk.

18:02He's like, hey, this is really bad.

18:04We might not want to, we're not going to cut rates.

18:08We're going to maybe hike more.

18:09So the conflict gave the hawks another thing to just kind of, to me personally, shoving

18:15Trump's face, right?

18:17And just like, hey, listen, this is you.

18:19You did the tariffs and you did the conflict.

18:21The growth rate of inflation was running at 2% before you did all this stuff.

18:25So don't look at us.

18:26Look at you, homie.

18:28So just always remember, these are human beings, right?

18:31And this institution was attacked, right?

18:34They're leaders.

18:35So these are their foot soldiers out here.

18:37And then all of a sudden, here comes Kevin Warsh.

18:40Hey, guys, we're going to change everything because you guys are a bunch of bleeps.

18:44And you don't know what you're talking about.

18:46So we're going to have task force.

18:48And we're, you know, so you can understand, right?

18:51There's some tension there.

18:53But I think some of the Iranian conflict is, remember, diesel prices go up and it infiltrates

19:00itself to food prices.

19:01And in that environment, it's very hard to like, hey, let's start cutting rates when

19:05inflation is already above target and the labor market isn't breaking.

19:08So just remember, if the labor market got weaker, all this changes, right?

19:13Paper, rock, scissors, labor overinflation still.

19:15But the labor market got better.

19:17And it doesn't matter if I disagree with this or everyone else agrees or disagrees.

19:22The Federal Reserve gave dissertation papers about population growth being so low that 33,000

19:28jobs per month is good enough.

19:30That's how I view it.

19:31So when they tell the bond market this and they wrote that paper and they said, guys,

19:35here it is.

19:36It's really hard to do it unless jobless claims are breaking.

19:39If jobless claims are heading toward 300,000, all this changes.

19:43All this deficit financing and inflation, all that, the bond yields go low.

19:48But jobless claims, lowest level since 1969.

19:52Unemployee rate is 4.3%.

19:54And keep an eye on the jobs data, of course, always.

19:57But here we are.

19:58It's Fed Day.

19:59So we just got to deal with this.

20:01And it's a learning curve for all of us under the Kevin Walsh regime.

20:07It absolutely is.

20:08Well, thank you so much for this Fed Day preview, of course, tomorrow.

20:12On Wednesday, we'll have news coverage.

20:15You'll have analysis.

20:16You and I will do another podcast.

20:18Thank you so much, Logan, for keeping us up to date.

20:22Pleasure, Wheeler.

20:22You and I will do another podcast.

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