No surprise: Fed holds rates steady

By BrokerOwner.net January 29, 2025 Housing News

Melissa
Cohn,
regional
vice
president
at

William
Raveis
Mortgage,
said
in
written
commentary
on
Wednesday
that
market
observers
should
keep
their
eyes
on
the
Fed’s
preferred
inflation
gauge,
the
Personal
Consumption
Expenditures
(PCE)
index.

Data
for
December
will
be
released
Friday,
and
the
annualized
growth
for
the

PCE
index
has
floated
between
2.1%
and
2.4%
since
August,
slightly
above
the
Fed’s
target
inflation
goal
of
2%.
This
data
could
provide
a
better
road
map
of
where
rates
are
headed
before
the
Fed’s
next
meeting
in
mid-March.

Cohn
also
said
that
Fed
policymakers
have
remained
an
“independent
body
and
will
not
just
lower
rates
if
asked,”
a
direct
reference
to

calls
from
President
Donald
Trump
to
lower
the
federal
funds
rate
and
spur
economic
growth
—
including
more
home
sales.

“Mortgage
rates
will
move
with
inflation
and
employment
data,
as
always,
even
with
all
the

uncertainty
behind
President
Trump’s
implementation
of
his
new
policies
and
the
impact
on
inflation
and
the
economy.
…
There
are
a
lot
of
unknowns
at
the
moment,”
Cohn
said.

“President
Trump
is
working
fast
to
implement
many
of
his
desired
policies
and
campaign
promises.
So
far,
there
has
been
little,
if
any,
impact.
It
will
take
time
to
see
how
everything
plays
out
in
Washington
and
how
the
new
policies
impact
inflation
and
the
economy.”

Even
as
the
Fed
funds
rate
has
been
lowered
by
a
total
of
100
bps
since
September,

mortgage
rates
have
gone
in
the
opposite
direction.
Since
Sept.
18,
when
the

Federal
Open
Market
Committee
(FOMC)
announced
its
first
rate
cut
since
March
2020,
the
30-year
conforming
loan
average
has
shot
up
from
6.31%
to
7.12%
as
of
Wednesday.

Mortgage
rates
tend
to
more
closely
follow
the
direction
of
Treasury
yields.

HousingWire
Lead
Analyst
Logan
Mohtashami
noted
that
the
spread
between
the
10-year
Treasury
and
the
30-year
mortgage
rate
has

narrowed
significantly
since
peaking
in
June
2023.

“The
U.S.
housing
market
would
have
been
much
worse
without
better
spreads
in
2024
and
now
going
into
2025,”
Mohtashami
wrote
on
Saturday.
“If
we
applied
the
worst
spread
levels
from
2023
to
today’s
rates,
we
would
see
an
increase
of
an
additional
0.79%
in
the
mortgage
rate
—
getting
near
8%.
On
the
other
hand,
if
mortgage
spreads
were
at
their
typical
levels,
we
could
expect
mortgage
rates
to
be
approximately
0.74%
to
0.84%
lower
than
they
are
now,
which
means
mortgage
rates
near
6%.”

Although
Trump
might
not
have
much
direct
influence
over
mortgage
rates,
his
newly
confirmed
Treasury
Secretary,

Scott
Bessent,
could.
Bessent
has
suggested
that

Fannie
Mae
and

Freddie
Mac
could
use
some
of
their
earnings
to
buy
mortgage-backed
securities,
which
would
narrow
the
spreads
and
potentially
create
lower
mortgage
rates
to
spur
more
home
purchases
and
refinances.