Federal Reserve Chair Jerome Powell speaks during a moderated discussion with Kai Ryssdal at the Macroeconomics and Monetary Policy Conference hosted by Federal Reserve Bank of San Francisco. on March 29, 2024. Federal Reserve photo
As expected, the Federal Reserve did not reduce the benchmark lending rate at its meeting yesterday, maintaining the rate at a 23-year high.
Fed President Jerome Powell said in his remarks that inflation reports proved higher than expected, but still under control, indicating that the current rate will remain in effect.
The Fed’s recent aggressive rate hikes have had a profound effect on the housing market, bringing mortgage interest rates to their highest points in more than 20 years. The higher rates have helped contribute to a housing market that has ground nearly to a halt.
Mike Frantatoni, senior vice president and chief economist at the Mortgage Bankers Association, said the MBA anticipated this decision and expects rate cuts to occur later this year.
“With our April forecast, we lowered our figures for originations and marked up our expectations for mortgage rates, and today’s FOMC decision confirms those revised expectations,” Frantatoni said in a statement. “We expect mortgage rates to drop later this year, but not as far or as fast as we previously had predicted.”
There are several scenarios that could result in a rate cut, he said, and a rate hike is highly unlikely. A consistently strong economy and continued contained inflation will likely result in the Fed simply holding off on cutting rates, but Powell added that an “unexpected weakening in the labor market” could bring the first cut.
The most recent report from the Labor Department on Wednesday found that U.S. job openings fell to a three-year low in March. Employees posted 8.5 million vacancies in March, down from 8.8 million in February. Still, those figures are historically low; prior to 2021, openings had never exceeded 8 million.
Economists, and the Fed, expect inflation and the U.S. economy as a whole to cool in the second half of the year.
