Fed Rate Hike: Jobs & Inflation on Mortgage Rates

Sep 7, 2026 · FOMC, 10-year Treasury, 30-year fixed · 32:39 video

By a former derivatives trader with 10 years experience at three of the world's largest investment banks.

The full breakdown runs 32:39. The written version below covers the numbers.

Fed rate hike odds flipped from about 50% to about 65% in one hour on Friday after the August jobs report came in at 162,000 against 53,000 expected. Every headline said the same thing: strong jobs, the Fed hikes, mortgage rates go up. Both halves of that are being reported backwards.

Force one, inflation

The headline is 3.4% against a 2% target, but open the basket up. Tariffs are a one-time step in the price level that expires by arithmetic, and the first real core-goods uptick was only 0.2% in July. Shelter is 35.3% of the whole index and owners' equivalent rent alone is 25.8%, the single largest line item in American inflation. The soft 0.1% shelter print everyone is quoting was hotels. And gasoline hit $4.07 on August 31, up 29% on the year, because of the Strait of Hormuz. A rate hike does not put more tankers through a shipping lane.

Force two, jobs

162,000 against a 12-month average of 31,000, and July was revised from minus 23,000 to plus 21,000. But wages are running 3.1%. Strong jobs lowers the cost of hiking. It does not give them a motive.

The part nobody covers

Your mortgage rate does not follow the Fed. Fed funds 3.63%, 2-year 4.34%, 10-year 4.77%, 30-year 5.25%, 30-year fixed mortgage 6.71%. A year ago that mortgage was 6.50%. The Fed cut all year and your mortgage got more expensive. On a $425,000 house that is about $17,000 over the life of the loan for waiting.

The call

Hold, with two or three dissents. The number to watch is the 10-year Treasury, because that is the rate your mortgage actually tracks. Two tripwires are live: which inflation gauge the Fed leans on, and wages moving to 4%.

The mechanism between the 10-year and your mortgage is in How Do Mortgage Rates Work? The 10 Year Treasury Decides.

Sources: BLS Employment Situation for August 2026 and CPI detail; Freddie Mac PMMS; U.S. Treasury daily yield curve; EIA weekly gasoline prices; FOMC materials. Every figure is first-party and listed in the video's pinned comment. Nothing here is investment advice.