00:00Bloomberg's international economics and policy correspondent Mike McKee with more. He's got a
00:05chart in hand. And as I talked to you, Mike, we noticed that the U.S. mortgage rate has risen
00:10to
00:106.66 percent. This is the 30-year fixed rate mortgage, according to Freddie Mac. That is
00:15the highest level in a year. And we know the 10-year yield is what the Trump administration
00:19is laser focused on, perhaps not as much the equity market, but really the bond market and
00:23the long end of the yield curve, the part of the curve that sets the rate for everything else for
00:28consumers. Actions have consequences, and that's what's happening with the markets. It's not just a
00:33line on a screen, as you just showed. It's a real-life impact on consumers and the government.
00:39If you look at mortgage rates, they have gone up because the 10-year is going up. And as you
00:45just
00:45mentioned, we hit the highest rate in a year. And up above is the average weighted interest rate for
00:50government treasuries. And as you can see, it has gone up over the past year. And I put in the
00:56dotted
00:57red line. Don't take that literally, but we're likely to see the government having to pay more
01:02now for interest. And this comes at the same time that Congress is working on a budget for next year
01:09that would raise the deficit maybe by as much as another trillion dollars. So at this point,
01:14what's happening in the markets, whether the Fed likes it or not, is having a real-world impact.
01:20Absolutely. I want to also ask you to fold in this morning's data. We got Core PCE,
01:25which is the Fed's preferred inflation gauge. Second quarter GDP, personal income, personal
01:29spending. Core PCE coming down or being held back a bit. Does that vindicate Kevin Warsh's stance?
01:37Not really, because everybody knew what the numbers were going to be ahead of time.
01:40Once you get the CPI and PPI, economists can calculate within a basis point or 10 of where
01:48the PCE is going to come out. And they pretty much had it now, a little bit lower in the
01:52core.
01:52But what the problem is here is that the people who are dissenting and want to
01:58raise rates are not just looking at the month-to-month changes or where we are right now.
02:03They're looking at the fact that inflation hasn't come down for five years anywhere close to the
02:09Fed's target. And they think that even if we see a small drop, as we did this month, it doesn't
02:15bring
02:15us to what they have promised to do. So they think that we need to raise interest rates even if
02:23inflation has come down a little bit. And that's going to be the debate going forward. We get two
02:27more PCE and CPI and PPI readings before the next meeting.
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