Fed leaves rates unchanged in March
What happened:
Following the March Meeting of the Federal Open Market Committee (FOMC), Fed Chairman Jerome Powell revealed that the Federal Reserve will leave interest rates unchanged, keeping them in the 5.25% to 5.5% range. The federal funds rate is one of the main tools the Federal Reserve has to control inflation, which is their main mandate.
In comments following the meeting, Chairman Powell said, “We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.”
What it means:
Prior to the meeting, most economists and traders weren’t expecting a rate cut during this cycle, so the headline didn’t come as a surprise. Where there had been a significant amount of uncertainty, however, was the timing of the Fed’s next rate cut. At the beginning of 2024, many were expecting a rate cut by this point in the year, but today’s comments suggest that we may have to wait until June or July.
Following their two-day meeting, Fed officials are still thinking they’ll call for three rate cuts by the end of 2024—the first reductions since March 2020.
Considering the data that’s coming in, Powell is cautiously optimistic. “I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%,” he said during a press conference on Wednesday afternoon. “We’re not going to overreact to these two months of data, nor are we going to ignore them.”
How this affects homeownership:
While it’s important to keep in mind that the federal funds rate is not the same as mortgage rates, today’s announcement will probably do little to affect mortgage rates. Lenders had expected this action from the Fed, and had accounted for them in the rates they’d been quoting leading up to the meeting.
Going forward, 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.
