We know the Federal Reserve Board met last week and held the fed funds rate steady at 4.5% — as a reminder, that is the overnight lending rate the Federal Reserve gives to banks. As we have discussed before, the markets usually bake in what they think the Fed will do at these meetings, and if the prediction comes true, the markets don’t react. This time, the prediction was right — but what the financial markets were looking for was the Fed’s prediction for the remainder of the year on the economy, inflation, employment and future rate cuts.

What came from the meeting were headlines about slower economic growth and stubborn inflation, which puts the Fed in between a rock and a hard place. Lowering rates will help stimulate growth, for example, but can also lead to higher inflation. To get a better idea of what we’re looking at for the rest of the year, let’s dig into a few takeaways from the meeting and what they mean for mortgage rates:

• • Predicted rate cuts: They held steady on predicting two .25% rate cuts for 2025 and another two in 2026.
  • Slower economic growth:  They have lowered the Gross Domestic Product  (GDP) forecasts from 2.1% in January to 1.7%. 

• Inflation will remain above the 2% target: Core inflation (excluding food and energy) predictions have risen to 2.8% from 2.5% — this shift partially reflects the expected impact of the US tariffs and the projected retaliation.

• Slowing the pace of quantitative tightening: This is something that can sometimes be overlooked but can have a consequential impact on mortgage bond pricing. This means the Fed will not be selling treasuries into the market or allowing them to expire. This can help keep the price of bonds stable and thus help keep mortgage-backed security prices stable. They are now capping the monthly treasury redemptions from $25mm to $5mm.

So if your head isn’t swimming yet remembering how much you disliked Econ 101 in college, you may be asking yourself, “What do I do with all of this info?” After all, if we don’t know how to connect the dots to our buyers and sellers, it’s just a bunch of useless information. So the takeaways are this: 

1. There is a balancing act between keeping the economy growing and inflation down, so don’t expect any major moves in the financial markets that will cause rates to come tumbling down. 
2. The economy is predicted to continue to expand, and employment prospects are good, which means buying or selling a home in today’s market makes sense and each individual buyer or seller should make the decision which is best for them. 

That’s where having that dedicated mortgage partner at Key Mortgage can help sift through all of this information and create an individualized plan for your clients that fits their needs and goals. Let’s get started today by integrating your Key Mortgage LO into your buyer and seller consultations today and providing that holistic approach to your clients they have come to rely on to make sound financial decisions.