^redacted‌ thank you for the tag. Even with almost 30 years now in commercial banking, my experience in predicting where interest rates will go has historically been bad. There are so many factors that can influence the markets and interest rates. However, if I were a betting man, especially in light of the weak jobs report that came out today, I would suspect we will start to see interest rates come down over the next 12 months. How much and how fast will largely depend on what is happening between a slowing of the economy and inflation. If inflation stays sticky, the Fed will have to lower interest rates slowly. Inflation is still above their target of about 2%. If the economy softens fast, they might accelerate the speed in which interest rates drop. I think most were betting on at least a 0.25% drop in interest rates in September, but after the news today I have seen some economists now predicting a 0.50% drop in September. I personally think the Fed is going to take it slowly.

One thing to keep in mind is that we still have an inverted yield curve where short-term interest rates are higher than long-term interest rates. The Prime rate should be below mortgage rates and treasury rates. At some point the yield curve needs to correct itself. So we could be in a situation in the future where short-term interest rates come down fast but long-term rates come down slowly or may not come down that much at all. Only time will tell. But is one thing I warn clients about. Just because the Prime rate comes down does not mean long-term rates will come down in lockstep.

Each of the big banks publishes an interest rate forecast. Head to the 'economics' section of each banks website:

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