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Interest Rates Have Finally Dropped

 Hello everyone. Welcome back to the Mortgage Rundown. Today we are going to talk about what’s happening with interest rates.

Here we are, one day after the Federal Open Market Committee (FOMC) lowered rates 50bps. This is the first time the Fed has lowered rates in 4.5 years. Just to refresh everyone’s memory, the Fed started hiking rates in this most recent cycle in March of 2022 and raised rates 5.25% over the course of 2022 and 2023. 

Now we sit in 2024, with inflationary pressures pretty well contained, a strong economy and a relatively strong jobs market. Even though the unemployment rate has risen, it is still quite low by historic standards.

Yesterday’s rate decision wasn’t the only important news. The Fed updated its dot plot which shows their forecasts over the next couple of years and where they project the Fed Funds rate to be. 

The Fed is expecting rates to end 2024 down another 0.50% from where they are today and down an additional 1% by the end of 2025. 

From here moving forward the Fed has stated they are more concerned about continued weakness in the economy than they are with respect to inflation. That means we should expect the market to be very reactive to the monthly jobs report. If the labor market continues to soften then it’s possible the Fed will move rates down at a faster pace than their current projections.

That’s it everyone from the capital markets desk this week. Thank you all for watching and have a great day.