Coronado: Unanimous Fed Hike Signals High Rates to Persist

Economist Julia Coronado stated that the Federal Reserve's most recent interest rate hike was unanimous, indicating that a policy pivot is not currently being debated within the central bank. She described the current economic environment as a necessary period of friction to reduce inflation, noting that higher borrowing costs will continue to suppress demand in sectors like housing.

The macroeconomic data supports Coronado's assessment of a prolonged high-rate environment. As of September 22, 2026, the federal funds upper bound sits at 4.00%, while the 10-year Treasury yield closed at 4.96%. Core Personal Consumption Expenditures, the Federal Reserve's preferred inflation gauge, continues to drift upward. This combination suggests a slower economic grind rather than imminent rate cuts.

Rocket Companies operates in the mortgage sector and faces direct headwinds from this rate environment. The stock closed at $12.74, down 34.19% year-to-date and 35.72% over the last twelve months. On the second-quarter 2026 earnings call, Chief Financial Officer Brian Brown stated that the expected housing recovery has not materialized because increasing rates continue to pressure affordability. The company guided third-quarter adjusted revenue to between $2.5 billion and $2.7 billion, a decrease from the previous quarter.

Housing market activity has weakened in response to high mortgage rates. Existing-home sales in August reached an annualized rate of 3.98 million units, the lowest figure in a year. Low turnover in the housing market affects brokerages, lenders, and related retail sectors. Rocket Companies operates at key points in this chain, including mortgage origination and servicing.

A significant factor maintaining pressure on inflation is the rise in energy costs. West Texas Intermediate crude oil prices climbed from $76.78 per barrel on August 5 to above $107 by September 15. This increase in energy costs spreads into other services, such as airfares and shipping, which complicates the Federal Reserve's ability to cut rates despite slowing growth.

Rocket Companies holds a large servicing book with potential upside if rates eventually decline. The company's servicing unpaid principal balance stands at $2 trillion, with $320 billion of that amount carrying note rates above 6%. Management reports that more than 70% of revenue now comes from recurring or less rate-sensitive business lines. In the second quarter, the company reported a record purchase share of 6.2% and a refinance share of 14.3%, along with adjusted EBITDA of $766 million and adjusted earnings per share of $0.16.

However, rising rates have negatively impacted the company's Mortgage Servicing Rights (MSR) valuation. The MSR fair value suffered a $616 million negative mark in the second quarter as rates moved against the book. Analysts' average price target for the stock is $17.70, while the forward multiple is approximately 16. The 200-day moving average sits at $15.89, acting as resistance above the current price.

The primary variable determining Rocket Companies' future performance is the trajectory of the 10-year Treasury yield. A durable move below 4% would lower mortgage rates and trigger refinancing activity on the company's high-rate servicing portfolio. Conversely, if oil-driven inflation keeps yields elevated, origination volumes will remain soft and MSR valuations will stay volatile. Coronado indicated that the latter scenario is currently the base case.