Fed cuts rate by a quarter point
In an expected move, the Federal Reserve announced a .25%, or 25 bps, cut to the federal funds rate after the November Meeting of the Federal Open Market Committee (FOMC). The vote was unanimous as officials feel that inflation is becoming more controlled and appear to feel the need to support employment. The federal funds rate will lower to a range between 4.5-4.75%, the lowest it’s been in almost two years.
Fed Chairman Jerome Powell, in comments following the meeting, pointed out that the Fed is able to adjust their policy to the economy. “If the economy remains strong and inflation is not sustainably moving toward 2%, we can dial back policy restraint more slowly. If the labor market were to weaken unexpectedly, or inflation were to fall more quickly than anticipated, we can move more quickly,” Powell said.
“Policy is well-positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate,” he added.
What it means:
The .25% cut does line up with what most economists were expecting. Chairman Powell suggested that the committee was pleased, though cautious, with the direction of the U.S. economy in general. “Overall, [we’re] feeling good about economic activity,” he said. “At the same time, we got one inflation report. … It wasn’t terrible, but it was a little higher than expected.”
The Fed’s remaining meeting for the year is scheduled on Dec. 17-18, and Powell left the door open for one more cut this year. “By December, we’ll have more data, I guess one more employer report, two more inflation reports and lots of other data, and we’ll make a decision as we get to December,” Powell continued.
How this affects homeownership:
Mortgage rates have steadily gone up since the last Fed cut was announced at their September meeting. Over the last few days before this meeting however, rates had started to come down a bit. It’s hard to say how the mortgage market will respond to this latest rate cut. As was said above, it was expected and was likely priced in to the current mortgage rates. Remember that the Fed’s rate is not the same as your mortgage rate.
The optimistic take would be that mortgage rates could start dropping now or in the near future with the Fed’s move. That would make now a great time for homeowners to think about refinancing their mortgage.
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