Fed Cuts Benchmark Rates and Mortgage Rates Go UP

As expected, on Wednesday, the Federal Reserve lowered its benchmark lending rate by a quarter point. It was the rate cut since December 2024.

However, as explained in previous newsletters, mortgage rates are based on expectations. Mortgage interest rates went up slightly after the announcement and later in the week because of what the chairman of the Federal Reserve said in his comments following the announced rate cut. According to Powell, the economy’s path forward looks murky. 

So, even though there are indications and expectations of future rate cuts this year, do not count on mortgage rates to continue to decline. It will be lovely if they do, but no one should rely on it. We will need to watch the market. The Federal Reserve remains in a tough spot, with both sides of its dual mandate – stable prices and maximum employment – under threat. I think what Chairman Powell said at the conclusion of the meeting sums it up well. He said, “It’s not incredibly obvious what to do.”