Ceasefire collapse is reinforcing the higher-for-longer rate case, economist says
Odeta Kushi (pictured top), deputy chief economist at First American, said the latest flare-up fits a pattern she and her colleagues had already accounted for. Even if there is some volatility day-to-day, the overall pattern seems to be for elevated rates.
“I think you can see some zigzag, but my baseline expectation is more of a higher-for-longer rate environment,” Kushi told Mortgage Professional America. “Inflation concerns are still alive and well. The conflict in the Middle East, as we’ve seen from recent news, is not over. And so that could put some more pressure on the inflation side. We’re not necessarily expecting rates to come down sharply.”
Factors working against rate relief
The Middle East is only one piece of the rate picture, Kushi said. The structural forces pushing against rate relief were already in place before Wednesday’s news.
“When we were coming into this year, maybe we were all a little bit more positive about mortgage rates being lower,” Kushi said. “Even so, we were out there saying that I think there are structural reasons to believe that they could remain elevated and above 6%. Obviously we had that one week in February where we had a five-handle, but for the most part, above 6%.”
The geopolitical pressure is only part of what is working against rate relief, she said. Speeches by new Fed chair Kevin Warsh have reaffirmed the central bank’s commitment to reducing inflation. That combined with other factors leaves a limited path to lower rates in the short-term, Kushi said.
