Fed holds interest rates steady after the first meeting this year

The Federal Reserve plans to keep interest rates where they are after its January meeting that ended Wednesday. This comes after the Fed announced interest rate cuts at its last three meetings of 2025.

The federal funds rate will stay at the 3.5% - 3.75% range set during the December meeting. Many experts were not surprised by this decision after the last cut to rates. Fed Chairman Jerome Powell said: “We are well positioned to wait to see how the economy evolves.”

The Federal Open Market Committee, which votes as a body on raising or lowering rates, is expected to meet again March 17-18. This will be the second of eight meetings this year and may be one of the last for Powell.

Powell’s second term as chairman is expected to end in May.

What does this mean?

The announcement from the Fed means that the cost to borrow money, including for mortgages, could stay about the same. This isn’t bad as mortgage interest rates hit a 3-year low earlier this month.

Experts predict the Fed will cut rates later this year, with a majority predicting that the interest rate cut will happen at the June meeting.

How does this affect homeownership?

The Fed’s decisions on interest rates can influence almost every aspect of the economy. Since the Fed cut interest rates in December, mortgage rates have seen a decrease. And interest rates do affect the bond market, which in turn can influence mortgage rates as well.

There are a few scenarios that could be at play:

If investors believe the Fed has done enough for inflation, they could rush into the bond market and drive rates lower.

There’s also the possibility of inflation coming back into focus, particularly as it relates to increases in prices due to tariffs and other geopolitical issues. That has the potential to push rates higher.

The bottom line is, if you need to buy a home, you should buy a home. No one knows for certain when the Fed will cut interest rates again or when mortgage rates could drop. If rates drop after you purchase your home, you could always refinance to match lower rates.

The team at Rate is here to help you navigate a tricky housing market. If you have questions, we have team members available to support you. Also, if you know you need to start the homebuying process, we can assist you in getting a mortgage pre-approval.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.

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