Fed holds, inflation prints 3.6%, and December hike stays live

The Fed held steady and left the door open. Wednesday's statement held the federal funds target range at 3.75% to 4.00% on a 10-2 vote, and both dissenters, Lisa Cook and Beth Hammack, wanted a quarter-point hike instead. The statement says "inflation remains elevated" and that more information will help the Committee decide its next stance, without promising a move either way. Redfin's read is that the meeting set up a possible hike at the December 8-9 meeting, which carries a dot plot; HousingWire and MPA ran the same December-hike angle. Mortgage News Daily saw it more mildly: markets trimmed their hike expectations after Chair Warsh's wait-and-see press conference, at the cost of some weakness in longer-term bonds.

This morning's data argues the hawks' side. BEA's September personal income report puts the PCE price index up 0.5% on the month and 3.6% from a year earlier, with core PCE up 0.3% and 3.1%. Q3 GDP grew at a 3.4% annual rate, up from 2.2% in Q2. Weekly jobless claims came in at 194,000, from 195,000 the week before. Strong growth with inflation well above the Fed's 2% target is what keeps the December question open.

Rates have been steady through it. Bankrate's 30-year fixed reads 7.31% for a third straight day, down from 7.38% on Monday. The 10-year Treasury closed Wednesday at 5.05%, up from 4.99% Tuesday, and is trading around 5.00% this morning. Freddie Mac's PMMS weekly average was 7.32% last week, down 0.08 from the week before but up 0.29 over 30 days, and a new PMMS reading lands today. On the purchase side, Redfin's four weeks ending October 25 show the median sale price at $389,601, down 0.1% from a year earlier, while the median monthly payment sits at $2,786, up 10.7%, and pending sales were down 15.9% from a year earlier, at the lowest level in Redfin's records. MBA's weekly survey had purchase applications up 4% on the week. For borrowers sitting on a quote, the hot inflation print plus a live December meeting is a reason not to count on a near-term drop.

The competitive story is Zillow. Zillow Home Loans launched an FHA down payment assistance second loan covering up to 3.5% of the price, at no interest and no monthly payment, forgiven after five years of on-time payments while the borrower stays an owner-occupant. HousingWire reports no income cap, no first-time buyer requirement, a 640 minimum score, and availability in 43 states plus D.C. Two reads on this: HousingWire frames it as a product launch, while National Mortgage News calls it a direct play for purchase business that puts agent referrals at risk for lenders without a comparable offering.

Both GSEs reported third-quarter results. Fannie Mae reported $4.2 billion in net income and pointed to credit score modernization as part of making it easier for lenders to do business with it. Freddie Mac reported $3.2 billion in net income, said it helped 420,000 families buy, refinance or rent, and that 51% of its primary-residence purchase borrowers were first-time buyers. On the operations side, Fannie added PointServ as an authorized report supplier for income and employment verification under DU's validation service. Coming up: the NMLS annual renewal period opens November 1, and the UAD 3.6 appraisal mandate starts November 2.