Fed Sticks to Script…Again

Last week brought us the most recent Federal Reserve Open Market Committee (FOMC) meeting. As expected, the Fed stuck to the script, leaving the Fed Funds Rate (FFR) unchanged. The Fed continues to forecast 50 basis points in future cuts for 2025 in its updated “Dot Plot”.  Post meeting commentary by Fed Chair Powell was no different than previous meetings, reiterating willingness to be patient and wait for more clear signs of economic cooling before pulling the trigger on the next cut.

There were a couple comments that did help bond yields and mortgage rates. The first was the comment regarding tariffs, and the view they are a short term issue, and not impacting Fed decision making. The second one was the decision by the Fed to start reinvesting a larger amount of money monthly back into purchasing treasury bonds. This move will help support bond demand and potentially lower yields- which also helps mortgage rates. The Fed bought billions of dollars of Treasury and Mortgage bonds during the pandemic, but has since been letting them mature and roll off the Fed balance sheet. This latest move slows that reduction.

This week brings the big inflation report known as the Personal Consumption Expenditure (PCE). It’s closely watched by the Fed, and has the potential to move the market.  A reading that comes out at or below expectations will be supportive of lower mortgage rates.

Home Loan Rate Volatility: MODERATE
Home Loan Rate Trend: FLAT