Fed Keeps Rates Unchanged Through Summer

In a move that most market analysts once again expected, the Federal Reserve announced another pause in rate changes after its July meeting that ended Wednesday. The pause mirrors similar decisions in January, March, May and June of this year, which were preceded last year by three consecutive cuts to the federal funds rates.

The federal funds rate will stay at the range of 4.25%-to-4.5%. The nation’s central bank did not predict whether it could cut rates by the end of the year, but in June suggested two cuts could come this year. Since no cuts have been made this year, it’s likely some are still to come by year’s end.

The Federal Open Market Committee, which votes as a body on raising or lowering rates, is expected to meet again in September.

The Fed also further adjusted its view of the overall economy to a slightly more negative stance as a key aspect behind the pause from its last meeting in June.

Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year, a statement released after the meeting said. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.

Questions surrounding President Donald Trump’s tariff threats, a potential crisis in the Middle East and a recent slowing of gross domestic product also pushed the Fed to express concern over consumer price increases and overall inflation as tariffs take effect in some areas.

The announcement from The Fed means that the cost to borrow money, including for mortgages, will stay about the same as it’s been since the last FOMC meetings in January, March, May and June.

The initial market reactions were lower on Wednesday. Both the bond market and the stock market dropped slightly after the announcement.

The Fed’s decisions on interest rates can influence almost every aspect of the economy. The last time the Fed cut interest rates, mortgage rates rose, so the two aren’t directly related. However, interest rates do affect the bond market, which in turn does influence mortgage rates.

There are a few scenarios that could be in play:

If investors believe the Fed has done enough for inflation, it 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. That has the potential to push rates higher.

The bottom line is, if you need to buy a home, you should buy a home. If you can afford to wait, you may want to wait.

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.