John's Finance Corner: Rate Cut Sparks Hope, But Mortgage Relief Remains Uncertain
After holding rates steady through the first five meetings of 2025, the Federal Reserve made its move last week, cutting the benchmark Fed Funds Rate by 25 basis points. The decision came amid growing concerns about labor market softness, even as inflation remains slightly above the Fed’s comfort zone. Chair Jerome Powell acknowledged the complexity of the moment, stating there’s “no risk-free path” when weighing inflation against employment risks.
The Fed’s dual mandate—price stability and full employment—has never felt more delicate. While inflation has ticked up modestly in recent reports, the latest jobs data and the risk of further declines helped tip the scales toward easing monetary policy. But the path forward remains uncertain. Among the 19 Fed officials, opinions vary widely: some expect no further cuts this year, others anticipate one or two more, and one member even projects as many as five additional cuts.
It’s important to remember that a Fed Funds Rate cut doesn’t guarantee lower mortgage rates. After the announcement, the 10-year Treasury briefly dipped below 4%, and mortgage rates followed suit—momentarily. But the next day’s jobless claims report showed initial claims down by 33,000 and continuing claims down by 7,000. That stronger-than-expected data pushed bond yields back up, and mortgage rates returned to pre-cut levels.
This week could be pivotal for mortgage rates. We’ll get fresh jobless claims data, the final reading of second-quarter GDP, and the Fed’s preferred inflation gauge—the Personal Consumption Expenditures (PCE) report. While forecasts suggest a slight uptick in PCE inflation, even a modest surprise could push bond yields higher, which would not be welcome news for those hoping mortgage rates will continue to fall.
Watching the market and wondering what it means for you?
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John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
