John’s Finance Corner: Fed Signals September Rate Cut — Mortgage Rate Implications
Last Friday at Jackson Hole, Fed Chair Jerome Powell opened the door to a Fed Funds rate cut in September, noting that “a shifting balance of risks may warrant adjusting our policy stance.” For borrowers, that doesn’t translate directly into lower mortgage rates overnight, but it does set the tone for what comes next.
Why Fed Funds Cuts Matter (Indirectly)
The Fed Funds rate is the overnight borrowing cost between banks. When it falls, it often spurs declines in the 10-year Treasury yield, which in turn influences mortgage rates.
Last September’s 50-basis-point cut sent Treasury yields tumbling—and mortgage rates briefly followed—before fresh labor data reversed those gains. That episode shows how volatile markets can be around Fed policy shifts.
Dual Mandate Divergence
• Inflation is inching higher of late, testing the Fed’s price-stability goal.
• Labor-market metrics are softening, strengthening the case for easing policy.
Powell’s comments reflect this tension: tame inflation argues for patience, while a cooling labor market suggests rate cuts could be appropriate to bolster growth.
Key Data Before September
Before the Fed’s next meeting (mid-September), watch for:
- Monday: July New Home Sales
- Tuesday: Home Price Appreciation report
- Thursday: Pending Home Sales, weekly Jobless Claims, and Q2 GDP revisions
- Friday: Personal Consumption Expenditures (the Fed’s preferred inflation gauge)
High-impact releases like these will drive bond yields—and mortgage rates—up or down, depending on whether they surprise to the upside or downside.
What Borrowers Should Do Now
- If you need rate certainty, consider locking before major reports land.
- If you can wait, monitor data outcomes—softer inflation or labor‐market readings could open a window for better rates.
- Talk through your timeline and goals with your mortgage advisor to craft a tailored strategy.
Powell’s hawkish turn-cold-hawk flip at Jackson Hole signals that September rate cuts are possible but far from guaranteed. By staying informed on housing and economic releases—and working with an advisor—you’ll be prepared to move when the moment is right.
Ready to explore your options or lock in a rate before the Fed meeting? Let’s connect and map out your next steps.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
