The Fed's rate cut comes as inflation approaches the 2% level. (iStock )
of the fed just cut interest rates This is the second time this year, and the move was largely expected as inflation continues to decline. The Federal Reserve cut its policy rate by a quarter of a point from 4.5% to 4.75%.
The decision came in the wake of the lowest inflation increase since 2021. The Consumer Price Index (CPI) increased by 0.2% in real terms in September, but this increase was minimal compared to what consumers have experienced in the past few years.
Daniel Hale, chief economist at Realtor.com, said at a meeting on layoffs that “job growth in October was unexpectedly weak following better-than-expected September labor market data; It has been corrected.”
“These data remind decision makers that it is important to consider broad trends rather than single pieces of information. Overall, the data shows that the labor market continues to slow; “This suggests there is a risk of cooling too quickly or too slowly,” Hale said.
Back in September, the Fed initially cut its policy rate by 0.5 percentage point to 4.75% to 5%. Both rate cuts were made in response to inflation gradually falling toward the Fed's 2% target level. At this point, it is difficult to judge whether further rate cuts will occur.
“Financial markets fully expected this rate cut, and the FOMC statement provides no new information regarding the likelihood of future rate cuts,” MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement. said.
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The U.S. added 818,000 fewer jobs this year than originally estimated.
Mortgage interest rates rise despite Fed rate cuts
Not all loans and credits are subject to these rate reductions. Elections and their impact on the economy also have a significant impact on interest rate outcomes.
“The MBA expects mortgage rates to remain within a fairly narrow range over the next year, with mortgage rates rising on signs of economic strength and stimulative fiscal and monetary policy, and the opposite,” Fratantoni said. '', it will decline.'' “The housing market continues to be poised for an active spring home buying season, driven by increased housing supply and slowing home price growth.”
In response to the rate cut, mortgage rates actually rose last week from 6.72% to 6.79% for a 30-year fixed mortgage. Reported by Freddie Mac. Some economists have cited the election results as a potential reason for the market turmoil.
“It's not always 100% clear what the market thinks, but the market is betting on strong economic growth and increased government spending, as well as higher prices and inflation due to higher tariffs and tax cuts,” said Ralph, senior economist at Realtor.com. We may be looking forward to a combination.” McLaughlin said.
After the Trump-Vance victory, the 10-year Treasury yield rose to its highest level since April, and mortgage rates typically move in the same direction as the 10-year Treasury yield. That wasn't the case last week.
“While we still expect mortgage rates to stabilize by the end of the year, they are likely to be higher than the market initially expected before election week,” McLaughlin said.
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Although mortgage rates are in a tough spot, and there is some optimism among mortgage industry experts, it's difficult to predict exactly when prices and interest rates will fall.
“The Fed's rate cuts are widely expected and are unlikely to result in significant changes to the housing market. Potential homebuyers will be disappointed to see mortgage rates remain high. Mortgage rates will move with the 10-year Treasury rate, so markets will gradually begin to normalize,” CoreLogic Chief Economist Dr. Thelma Hepp said in a statement. “We expect the interest rate environment for home purchases to improve further next year.”
Homebuyers are generally holding back on home purchases. Currently, many homeowners are not selling their homes because mortgage interest rates are below 6%. Homes on the market sit for too long as buyers wait for volatile interest rates to calm down.
“Despite these challenges, Americans remain optimistic about homeownership, and home builders are positioned to fill the gap, especially if policymakers at the federal, state, and local levels can meet the building challenges. Yes,” Hale said.
“Although existing home sales continue to hover near their lowest levels in 30 years, New home sales maintain same pace as 2019And even as existing home prices continue to rise, new home prices are more stable due to a smaller footprint and focus on affordability,” Hale added. Explained.
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