Citing that inflation is now near its 2% target and that there is some weakness developing in the labor market, the Federal Open Market Committee (FOMC) today voted to cut the Fed Funds rate by 0.25%, to the range of 4.5% to 4.75%.
“The FOMC cut rates by another 25 basis points at its November meeting, noting that risks to its inflation and employment goals are ‘roughly in balance,’” says Mike Fratantoni, senior vice president and chief economist for the Mortgage Bankers Association (MBA), in a statement. “Financial markets fully anticipated this rate cut, and the FOMC’s statement provides no new information regarding the likelihood of future cuts.
“The big impact on rates this week was clearly the election,” Fratantoni says. “As results rolled in, longer-term rates jumped higher. Investors expect somewhat stronger economic growth, higher inflation, and larger deficits.
“[The] MBA expects that mortgage rates will remain within a fairly narrow range over the next year, with mortgage rates moving higher on signs of economic strength and more stimulative fiscal or monetary policy, or lower if it’s the opposite,” Fratantoni adds. “Housing markets continue to be primed for a stronger spring homebuying season, boosted by more housing supply and slower home-price growth.”
In a separate statement, Selma Hepp, chief economist for CoreLogic, says the rate cut is “unlikely to herald in much of a change for the housing market.”
“Potential homebuyers will be disappointed to see that mortgage rates remain stubbornly high, as it also moves with the 10-year Treasury, so the markets will only slowly begin to normalize,” Hepp says. “We anticipate a much more improved rate environment for home buying next year.”
Photo: Etienne Martin