Fed chooses to leave rates alone
At the conclusion of their January Meeting of the Federal Open Market Committee (FOMC), Fed Chairman Powell announced that they are leaving interest rates unchanged. They remain in the range of 5.25% to 5.5%.
In their statement following the meeting, they said, "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent." The federal funds rate is one of the only tools the Federal Reserve has to control inflation.
What it means:
Most economic watchers hadn’t expected a rate cut after this meeting, so the news didn’t come as a surprise. In statements after the meeting, however, the chairman hinted that there was more work to be done, meaning their rate may stay higher for longer.
“Inflation is still too high, ongoing progress in bringing it down is not assured and the path forward is uncertain,” Powell said. “I want to assure the American people we are fully committed to returning inflation to our 2% goal.”
“The lower inflation readings over the second half of last year are welcome, but we will need to see continuing evidence to build confidence that inflation is moving down sustainably to our goal,” Powell continued.
How this affects homeownership:
Mortgage rates had been drifting down throughout the day, and in the days before the Fed meeting. While it’s important to keep in mind that the federal funds rate is not the same as mortgage rates, and their movements are not always related to each other.
So while mortgage rates came down on January 31st, it likely was unrelated to the Fed decision.
Going forward, because the Fed kept their rates unchanged and indicated that it’d stay that way in March, information from the broader economy will have a greater effect on mortgage rates than news from today. That’s why you should apply for a mortgage pre-approval now and start working with a loan officer to take advantage of the fluctuation of mortgage rates.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.