2023 has been all about persistence.

We are almost through three-quarters of the year. And if we had a word to describe this year, it would be persistence. As a matter of fact, persistence could describe the past 15 years. Yes, it has been 15 years since the Great Recession. And the effects of the Great Recession persisted for much longer than we expected. The housing market slowly recovered for years before real estate turned hot again. Then the pandemic hit and again the pandemic persisted longer than we expected. Those who expected COVID to fade away quickly were deeply disappointed.

Now we have the same persistence applied to the current interest rate environment. When the Federal Reserve started raising rates about 18 months ago, many thought that we are just going back to normal after the pandemic. But the increases in rates have persisted for much longer than expected and now rates are expected to stay higher for a longer period of time. Why? For one, inflation has persisted for longer than expected. Secondly, the economy has continued to expand for longer than expected. Thus 2023 is all about persistence. But that does not mean that higher rates and inflation are here to stay. Like the recession recovery, the tide will change.

We are already seeing evidence of this change. Inflation has slowed down significantly. Jobs growth is subsiding, which will open the way for the economy to slow down. These trends open the door for rates to stabilize and hopefully fall somewhat in the future. Will this happen in the fourth quarter of this year? Or will we have to wait a bit longer? Another inflation indicator is due this week and next week we will see the jobs report for September. This data will help us answer these questions. If there is good news on the “moderation front” – remember that market rates such as mortgages can move before the Fed acts – especially if we hear positive statements from Fed members in their many speeches around the country.