The Federal Reserve met this week and held rates steady as expected. The bigger question is what is said after the meeting when Chairman Powell gives his speech.
Chairman Powell cited ongoing inflation pressures as the primary reason for holding rates steady. No one really expected a rate cut this month. Rising gas prices, driven in part by continued tensions in the Middle East, are contributing to inflation remaining stubborn.
The Fed still expects at least one rate cut in 2026. However, concerns remain around the labor market, as job gains continue to come in lower and unemployment remains a key focus. The Fed is watching both the labor market and inflation.
Core PCE projections for 2026 were revised up to 2.7% from 2.5%, reinforcing that inflation concerns are currently outweighing employment in the Fed’s decision making. The Producer Price Index (PPI) data released showed price increases across multiple sectors, both including and excluding energy, signaling that cost pressures remain elevated.
The immediate reaction in the bond market Wednesday was not good. Most lenders repriced about .125 point worse Wednesday afternoon. Today the bond market opened up worse, has improved some but not enough for lenders to improve pricing. We can expect more volatility in the market depending on how things play out in the Middle East. If oil prices continue to increase, it will affect interest rates due to inflation concerns. Rates are still better than they were a year ago and remember that you can always refinance if rates do come back down. I started hearing the line “Date the rate, marry the home” again! Meaning buy the home you want and know that you can always refinance. It’s always hard to know when rates are at the lowest. I have also said many times that if I truly knew what was going to happen with interest rates, I would be sitting on a beach somewhere! Please reach out if you have any questions on this.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
