John’s Finance Corner: Fed Cuts Rates Again as Shutdown Clouds Outlook
The Federal Reserve cut the Federal Funds Rate for the second time this year, lowering it by 25 basis points (0.25%) to a target range of 3.75% to 4%. The move, widely expected by markets, follows a similar cut in September as the Fed continues to balance persistent inflation pressures with signs of a weakening labor market.
Despite the limited data available due to the ongoing government shutdown, the Fed noted that overall economic conditions have changed very little since its last meeting. Notably, two Fed members dissented on the latest decision: new Fed Governor Miran favored a larger half-point cut, while Fed President Schmid voted against any reduction at all.
It’s important to remember that a Fed rate cut does not directly translate into lower mortgage rates. The Federal Funds Rate determines what banks charge one another for short-term, overnight lending it’s not the same rate consumers pay on home loans.
In fact, following this latest cut, mortgage rates actually ticked slightly higher. That move was tied to a rise in the 10-year Treasury yield, which mortgage rates tend to follow closely. While bond yields initially held steady after the Fed’s announcement, comments from Chairman Jerome Powell during his press conference sparked market reaction.
Powell emphasized that another rate cut at the December meeting is “not a foregone conclusion far from it.” Those remarks raised doubts about the Fed’s near-term path and caused bond yields to rise, nudging mortgage rates upward.
Meanwhile, the government shutdown continues to ripple through the economy. Beyond the personal strain it places on families, the lack of official financial data makes it difficult for the Fed and investors to gauge real-time conditions. Without that insight, policy decisions become more uncertain, complicating the path toward long-term economic stability.
Hopefully, a resolution comes soon allowing critical data releases to resume, restoring confidence in the markets, and paving the way toward more affordable housing and financial balance.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
