Fed leaves rates unchanged, forecasts 2 cuts later in the year
Economic factors could cause the Federal Reserve to change course, but heading into the spring homebuying season, mortgage rates are likely to remain stable.
As expected, the Federal Reserve didn't adjust interest rates following its meeting on Mar. 19 — but the Fed chair did express concerns about future inflation and slowing economic growth.
The benchmark rate will remain in the 4.25%-4.5% target range as the Fed continues to take a wait-and-see approach, gauging the impact of the Trump administration's recent policy changes around tariffs, federal job cuts and deportations.
Cuts still likely in 2025: While the Fed isn't ready to act yet, the board's March forecast puts the interest rate around 3.9% by the end of the year, suggesting two cuts are coming later in 2025.
However, Federal Reserve Chair Jerome Powell emphasized that the board is waiting for more clarity on the economy before making its next move.
"We are in a place where we can hold or cut [interest rates]," Powell said in a press conference following today's announcement, adding that it's going to be difficult to determine how much impact tariffs — versus other economic factors — are having on inflation in the coming months.
But he did indicate that tariff policies have delayed further progress on lowering inflation, though he still expects to reach the target goal of 2% in 2026.
Powell also noted that consumer sentiment has fallen sharply, but at this point the hard data — such as unemployment and slightly higher consumer spending — still points to a healthy economy.
Where rates go from here: What happens in the economy in the next three months will be the main driver of future rate cuts, said Melissa Cohn, regional vice president of William Raveis Mortgage — suggesting that cuts later in the year are not guaranteed.
"[Powell] has repeatedly said that the Fed is in no hurry to cut rates. The Trump administration's tariffs could reignite inflation, making future rate cuts unlikely, too," Cohn said.
Rates just one factor for homebuyers: In addition to federal policies, the Fed is also keeping an eye on declining consumer confidence and weakening economic conditions, said Lisa Sturtevant, chief economist at Bright MLS.
"Lower rates are good for homebuyers who have been waiting for mortgage rates to come down. But if rates come down because the labor market is weaker and people are worried about their jobs, those lower mortgage rates won't be able to bring as many homebuyers into the market," Sturtevant said.
"So, it's not just about when the Fed cuts rates, but rather what the overall economic picture looks like. Right now, in this challenging environment, the Fed is trying to 'separate sound from the noise' to gauge where the economy is headed."
What to expect this spring: Heading into peak home shopping season, mortgage rates will likely remain steady or perhaps tick down, said Samir Dedhia, CEO of One Real Mortgage.
Dedhia believes the Fed will, as forecast, implement two rate cuts later in the year, assuming "inflation continues to moderate and economic conditions evolve." If that's the case, "lower rates could improve affordability and drive increased activity in the real estate sector," Dedhia added.
The 30-year fixed-rate ticked down slightly following the Fed's announcement, according to Mortgage News Daily. The stock market moved higher following the decision, with the Dow Jones Industrial Average rising almost 1%.