Economic data released last week renewed pressure on the central bank to lower interest rates, as investor concerns over a potential recession sent share prices tumbling.
Inflation is now hovering just above the Fed’s 2 percent target, while unemployment is at a three-year high of 4.3 percent, indicating the agency may have missed the “soft landing” it was aiming for by holding interest rates at higher levels.
Mortgage rates are tied to the 10-year treasury, not the Fed, but can be influenced by the same economic factors that affect the agency’s decision to raise or lower interest rates. Movement, or even anticipated movement, from the central bank often comes alongside changes in mortgage rates — which dropped to a 15-month low in the week after the jobs report.
“There’s so much talk about [the Fed meeting] that [mortgage] rates have already been reduced,” said Phil Crescenzo Jr., a Southeast regional executive at Nation One Mortgage Corporation.
The Fed started hiking interest rates in the spring of 2022, hoping to stave off rising inflation. Mortgage rates rose alongside them and cooled the housing market’s boom, sidelining loan-dependent buyers and would-be sellers worried about parting with their historically low mortgage rates.
The agency continued the hikes until last July but has since held rates steady, despite its indication earlier this year that rate reductions were on the near horizon. Stubbornly-high inflation rates kept cuts projected for this spring at bay, and home sales slowed to a crawl.
The Fed’s next meeting is slated for Sept. 18. If the agency does lower rates, it’ll mark the first reduction since the start of the pandemic in 2020.
“For the whole market to be on the edge of its seat for even a 50-point basis reduction, it’s been raised so many times significantly that everybody’s cheering,” Crescenzo said. The likely cut won’t be significant enough to move the needle for strapped borrowers, he…