The Fed’s Federal Open Market Committee (FOMC) announced Wednesday a half-of-a-percentage point cut to the federal funds rate, dropping it to 4.75% - 5.00%.
This is the first time the FOMC has cut the federal funds rate since March of 2020 at the onset of the COVID-19 pandemic. Over the past four years, the federal funds rate has risen 525 bps from 0% - 0.25% to 5.25% - 5.50%. To curb inflation, the Fed has held the current federal funds rate steady since July of 2023.
Why did the Fed cut the federal funds rate?
The FOMC has a target of 2% inflation and has been keeping the federal funds rate unchanged at 5.25% - 5.50% since July of 2023 to achieve that goal. During their regularly scheduled meetings, the group looks at economic data such as monthly Consumer Price Index reports to track inflation.
With inflation numbers inching closer to a 2% target over recent months, Fed Chairman Jerome Powell made it clear that the committee felt comfortable reducing the federal funds rate a half-of-a-percentage point.
Some economists expected a more conservative, quarter-of-a-percentage point cut, but the FOMC stated “In light of the progress on inflation and the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/2 percentage point to 4-3/4 to 5 percent.”
When will mortgage rates go down?
Those keeping an eye on the housing industry have been wondering how this recent Fed rate cut will impact mortgage rates. When will mortgage rates go down?
Mortgage rates have already been on the decline, with anticipation of the recent federal funds rate cut already a contributing factor. With three more Consumer Price Index releases and two more FOMC meeting dates ahead before the end of the year, the outcomes of these meetings will determine how mortgage rates may continue to decline.
What are mortgage rates today?
Mortgage News Daily reported 30-year fixed mortgage rates near 7% for the first half of 2024, down from a peak of 8.0% in October 2023.
Mortgage rates started to decline further into the second half of the year. Positive numbers from monthly CPI reports and encouraging news from FOMC meetings have led to lower rates. Ahead of the September Fed rate cut, mortgage rates had fallen to the low 6% range. There have not been comparable numbers that low since early 2023.
For up-to-date information on mortgage rates today, Mortgage News Daily provides daily updates to the 30-year fixed mortgage rates. This reference includes updates from Freddie Mac, Mortgage Bankers Association, and FHFA.
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