The Federal Reserve wrapped up its latest meeting. Here's what originators need to know:
The economy is still growing steadily, and the job market remains strong with unemployment staying low. However, inflation is still running hotter than the Fed would like. The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. Uncertainty around the economic outlook has increased, leading the Committee to be attentive to the risks to both sides of its dual mandate.
The Fed has decided to keep interest rates steady for now, maintaining the federal funds rate between 4.25% and 4.5%. They're watching economic data closely, though, and haven't ruled out more rate changes later.
On the mortgage front, the Fed will continue reducing its investments in Treasury bonds, government agency debt, and mortgage-backed securities. Starting in April, they'll slow down how quickly they reduce Treasury holdings from $25 billion per month down to $5 billion. But they'll continue cutting $35 billion per month from their agency mortgage-backed securities and agency debt.
The Fed remains committed to balancing employment growth with getting inflation back down to their 2% target. They're closely tracking the economy, labor market, inflation trends, and global developments, and they'll adjust their strategy if needed.
One Fed member, Christopher J. Waller disagreed with this decision—not because of the interest rate itself, but because he wanted to maintain the faster reduction pace for securities holdings.
One Real Mortgage CEO Samir Dedhia commented on the Fed’s stance, stating that it reinforces its measured approach to monetary policy amid a complex economic landscape. In light of recent tariff discussions that could contribute to price pressures, the Fed seems as though it will continue to assess inflation, employment, and global trade uncertainties.
“The unemployment rate has stabilized at a low level, and while wage growth has slowed, overall job market conditions remain strong. Inflation, while somewhat elevated, has moderated compared to last year’s peak,” Dedhia commented. “The Fed’s latest statement emphasizes the risks to achieving its dual mandate of maxim.”
For consumers, the Fed’s decision aligns with the recent downward trend in mortgage rates, which have dropped over the past two months, offering increased affordability for homebuyers.
“I expect mortgage rates to remain steady or continue to decrease throughout the year, further supporting homeownership opportunities,” Dedhia continued. “While credit card and auto loan rates are likely to stay elevated in the near term, the overall direction of interest rates suggests a more stable lending environment.”
Looking ahead, Dedhia also anticipates that the Fed will begin cutting rates in 2025, likely implementing two rate cuts as inflation continues to moderate and economic conditions evolve.
