Have Mortgage Rates Peaked? Doves and Hawks will give you Different Answers

Some old terminology is starting to make its way back into economic vocabulary. Many folks think that it’s the Chairman of the Federal Reserve (Jerome Powell) that solely makes decisions about rate hikes, treasury bonds, and is the only person that has his hands on the levers and pullies of the economy.

There are actually 12 voting members that make up the Federal Open Market Committee (FOMC) that hold the US economy’s fate in their hands. It’s the FOMC that is the Federal Reserve’s chief body for making monetary policy.
Just like in any group of people, folks have differing points of view. The more alike they are, the more easily it is to predict their future actions. The more zest they have for debate, the more likely there is to be wobbles in policy. And that is EXACTLY where we are today.

Let’s get a little nerdy for a moment, and learn what the difference is between a hawk and a dove.

In the context of the Federal Reserve, "hawks" and "doves" are terms used to describe the policy stances of its members, particularly regarding monetary policy and interest rates. These terms are often used in a broader economic context to describe policymakers' views on inflation, unemployment, and economic growth.

Hawks – Policy Driven to keep Claws in the Economy:
Inflation Concerns: Hawks are Federal Reserve members who are more concerned about the potential negative effects of inflation. They tend to prioritize price stability and are inclined to support higher interest rates to curb inflationary pressures.
Preventive Measures: Hawks often advocate for taking pre-emptive measures to prevent inflation from rising too high. They may be more likely to support raising interest rates or adopting a tighter monetary policy stance to cool down an overheating economy.

Doves – Tolerance in the economy to foster growth:

Employment and Growth: Doves, on the other hand, are more focused on maximizing employment and fostering economic growth. They are generally willing to tolerate slightly higher levels of inflation if it means supporting job creation and economic expansion.
Accommodative Policies: Doves are more likely to favor accommodative monetary policies, such as lower interest rates, to stimulate economic activity and employment. They may be more patient in raising rates, even if inflation starts to rise, if they believe there is still slack in the labor market.

Below is a chart of how the 2023 voting members rank in regards to their ‘Hawkishness’:

As you can see the 2023 voters skew hawkish. When you examine the chart deeper, you’ll see that the 2024 voters skew EVEN MORE hawkish!

Once we get to 2025, the FOMC seems to become passive and is dove dominated. 

What does that mean for mortgage rates? Well, Christopher Waller one of the biggest hawks in the FOMC dawned some Dove feathers. And this is what has caused mortgage rates to fall over the last 5 consecutive weeks. He has come out and said that economic rate policy is in the right place and further rate hikes aren’t needed. With Jerome Powell still believing that there is not a recession ahead of us, and that his soft landing mantra is still possible – these two hawks have been very lovey dovey (pun intended) in getting buy in that the economy’s tide doesn’t likely need to recede much more.

All it takes is for a few members to jump on board with Michelle Bowman’s comments (here they are from her 11-28 reflection on policy https://www.federalreserve.gov/newsevents/speech/bowman20231128a.htm to get rates moving back up again. She believes harder brakes need to be pulled to keep from inflation re-establishing itself, and she clearly notes that inflation is still a major issue. The way you deal with inflation is to take money out of the economy. The biggest way to do that is to raise the interest rates that they governments charge banks. That trickles down to what banks charge their customers.

The voting members of the FOMC are skeptical and squabbling. So for those that believe that rates have indeed peaked – be weary for hawks in doves’ clothing. For those reasons I believe we MAY have come to a period of time of a false release and we are likely to see rates pop up, especially after these economists see record breaking sales figures from the Christmas buying season.

In the meantime, I’ve said this before – and I’ll say it again, outside of the 2008-2009 financial crisis when one-armed professional accordion players were getting half a million dollar mortgages without income verification, home prices rarely fall inside of a recession. In fact, its usually a safer place to house (another pun intended) your investments than inside of a stock market correction.
With that, I say fly on friends! ????

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.