Latest news with #ratecuts
CNET
2 days ago
- Business
- CNET
July Mortgage Rate Forecast: The Fed Isn't Rushing to Lower Interest Rates
Buyers should keep an eye on the possibility of rate cuts in the next few months. Tharon Green/CNET For the past several months, the average 30-year fixed mortgage rate has sat between 6.5% and 7%. Prospective homebuyers shouldn't hold their breath for that to change anytime soon. On July 30, the Federal Reserve is expected to keep borrowing rates the same at its fifth monetary policy meeting this year. Although the central bank doesn't directly dictate mortgage rates, its policy decisions indirectly influence consumer borrowing costs, including for mortgages, over the long term. Mortgage rates, which are primarily tied to 10-year Treasury yields in the bond market, are also sensitive to other factors, including investor outlook for future Fed moves. Economists will be closely listening to Fed Chair Jerome Powell's post-meeting remarks for any hints about rate cuts later this year. "While the Fed isn't expected to cut rates, Powell's language will be crucial," said Logan Mohtashami, lead analyst at HousingWire. Markets currently expect a Fed cut in September. If Powell indicates slow progress on inflation and ongoing economic uncertainty, that may keep the Fed in monitor mode this fall, and bond yields and mortgage rates could increase. Ultimately, it's unlikely that mortgage rates will fall significantly outside the current range unless the economy slows significantly or unemployment increases sharply. Affordability challenges and elevated mortgage rates have kept the housing market frozen for several years. Even as the long-standing housing shortage eases in several local markets and gives those buyers improved negotiating power, the rest remain locked out by steep home prices. Why is the Fed holding off on interest rate cuts? After inflation showed ongoing signs of slowing in late 2024, the Fed lowered rates three times, yet the picture is more complex this year. The Fed is tasked with maintaining maximum employment and containing inflation. A sluggish economy typically warrants interest rate cuts to stimulate growth, but lowering rates too quickly could fuel price growth when inflation is still sticky. Though President Trump has pushed for the Fed to cut rates immediately, reducing rates prematurely, especially in response to political pressure, could exacerbate the problem. "Markets might interpret such a move as a signal of diminished inflation discipline, pushing bond yields higher due to inflation concerns," said Kara Ng, senior economist at Zillow. "Ironically, this could cause mortgage rates to rise, not fall, counteracting the intended stimulus." Tariffs are also a wild card for the mortgage market and the broader economy. While assumed to be inflationary, they could be transitory and translate into a one-time price increase for goods and services. "There is a widely held consensus among economists that the potential impact of the administration's tariff policies and economic growth are still unclear and more time is needed to see the full effect," said Selma Hepp, chief economist at Cotality. "As a result, the Fed is adopting a 'wait-and-see' approach." Most analysts expect two Fed rate cuts this year, but with trade negotiations ongoing, it's still a toss-up, said Mohtashami. Following signs of slowing inflation in late 2024, the Fed implemented three interest rate cuts but has since adopted a more cautious wait-and-see approach this year. Policymakers have held interest rates steady amid market fluctuations, a stance it's expected to uphold at its Federal Open Market Committee meeting next week Today's complex economic picture presents a challenge for the Fed, which is tasked with maintaining maximum employment and containing inflation. The president has claimed that prices are low and the Fed should cut rates immediately. But tariffs, which are taxes on imported goods, are widely expected to drive up prices. We're already starting to see the effects: In June, inflation ticked up to 2.7%. While lower than markets expected, price growth is still well above the Fed's annual target rate of 2%. As a result, experts say the central bank has good reason to keep rate cuts on pause. "Increased uncertainty about the inflation picture lessens the chances of a cut in rates by the Fed," said Keith Gumbinger, vice president at "Greater inflation would argue against cutting rates, absent any significant deterioration in labor conditions." Fewer interest rate cuts combined with the recently passed budget bill, which is expected to significantly boost government debt deficits, are likely to keep upward pressure on longer-term bond yields and mortgage rates. But Kushi notes that "any changes, delays or confirmations around tariffs could swing investor sentiment and move yields." When will mortgage rates fall to 6%? Earlier mortgage projections had rates dropping to around 6% by the end of 2025. Now, mortgage rates are expected to dip only slightly. Fannie Mae's June Housing Forecast says the average rate for a 30-year fixed mortgage will reach 6.5% by year's end. The Mortgage Bankers Association expects rates to stay mostly flat around 6.7% this year. Generally, housing market experts don't see home loan rates falling below 6% until late 2026 at the earliest. However, rising unemployment or negative growth could prompt a series of Fed cuts and lead to lower bond yields and mortgage rates. At the same time, if cheaper mortgages result from an economic downturn, with households facing job losses, tighter budgets and financial instability, potential buyers could remain locked out. A recession isn't a foregone conclusion, but the risk of a slowdown remains, with joblessness on the rise. Can you get a lower mortgage rate? Prospective buyers waiting for mortgage rates to drop may soon have to adjust to the "higher for longer" rate environment. Yet while market forces are out of your control, there are ways to make buying a home slightly more affordable. Last year, nearly half of all homebuyers secured a mortgage rate below 5%, according to Zillow. Here are some proven strategies that can help you save up to 1.5% on your mortgage rate. 💰 Build your credit score. Your credit score will help determine whether you qualify for a mortgage and at what interest rate. A credit score of 740 or higher will help you qualify for a lower rate. 💰 Save for a bigger down payment. A larger down payment allows you to take out a smaller mortgage and get a lower interest rate from your lender. If you can afford it, a down payment of at least 20% will also eliminate private mortgage insurance. 💰 Shop for mortgage lenders. Comparing loan offers from multiple mortgage lenders can help you negotiate a better rate. Experts recommend getting at least two to three loan estimates from different lenders. 💰 Consider mortgage points. You can get a lower mortgage rate by buying mortgage points, with each point costing 1% of the total loan amount. One mortgage point equals a 0.25% decrease in your mortgage rate. Watch this: 6 Ways to Reduce Your Mortgage Interest Rate by 1% or More 02:31
Wall Street Journal
2 days ago
- Business
- Wall Street Journal
Higher Tariffs Might Not Be High Enough to Spur ECB to Further Rate Cuts
Higher tariffs on U.S. imports from Europe, agreed upon Sunday, will restrain economic growth in the eurozone, but that might not spur the European Central Bank into immediate rate cuts. While many of the details of the agreement between President Trump and European Commission President Ursula von der Leyen remain sketchy, the tariffs that will apply to most of Europe's exports to the U.S. will be higher than those assumed by the ECB's economists when they last produced economic forecasts in June.
Fox News
2 days ago
- Business
- Fox News
Trump is concerned about how the Fed is managed more than about firing Powell, says deputy chief of staff
Deputy White House chief of staff James Blair discusses where President Trump stands on Jay Powell's position with the Federal Reserve, when we may start to see rate cuts, and more on 'Sunday Night in America.'
Yahoo
3 days ago
- Business
- Yahoo
Fed Is Set for Contentious Debate as Investors Eye Fall Rate Cut
(Bloomberg) -- Federal Reserve officials are determined to hold interest rates steady a little while longer, though an increasingly contentious debate at this week's policy meeting may bolster expectations for rate cuts in the fall. The High Costs of Trump's 'Big Beautiful' New Car Loan Deduction Can This Bridge Ease the Troubled US-Canadian Relationship? Trump Administration Sues NYC Over Sanctuary City Policy Fed Chair Jerome Powell is under intense pressure from President Donald Trump and his allies to reduce borrowing costs, and may face multiple dissents this week from officials who want to provide support to a slowing labor market. But the US central bank is widely expected to leave its benchmark rate unchanged at the conclusion of its two-day meeting on July 30 as policymakers await more data revealing the impact of tariffs on consumer prices. 'Even as we don't see any change in the policy rate, I think we see hints that we are at a turning point in the policy path,' said Sarah House, senior economist at Wells Fargo. 'But of course, most of the committee doesn't seem there yet — I think they're still wary of what happens with inflation regarding these tariffs.' Fed officials will publish a post-meeting statement Wednesday at 2 p.m. in Washington, and Powell will hold a press conference 30 minutes later. Interest-rate futures show investors are betting on a likely rate reduction at the next meeting, in September, and Fed-watchers will be listening for anything that helps ratify that view. The rate decision lands in the middle of a week jam-packed with key economic data releases, including a monthly employment report due Friday. Economists expect it to show a slowdown in hiring in July as uncertainty around Trump's trade policy continued to weigh on the outlook. Dissents Many analysts see a possibility of dissents from Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman, two Trump appointees who have expressed concern that rates are too high given rising risks to employment. Waller hinted at a dissent earlier this month, saying the Fed should move now to support a labor market that is 'on the edge.' Bowman also said in June that she could support a rate cut as soon as this month if price pressures remain subdued. If both Waller and Bowman cast dissenting votes, it would be the first time two governors did so since 1993. Waller is considered to be among candidates Trump is considering to replace Powell when his term as chair expires in May. Some commentators have shrugged over divisions appearing in the vote. In a note to clients on Friday, Michael Feroli, chief US economist at JPMorgan Chase & Co., said he'd view two dissents as 'more about auditioning for the Fed chair appointment than about economic conditions.' Diane Swonk, chief economist for KPMG, noted that dissents are common close to policy turning points. 'One should expect dissent as the Fed gets closer to deciding when to cut rates, given the wide band of uncertainty over how tariffs play out,' she wrote in a note to clients on Thursday. While Waller and Bowman are increasingly focused on the central bank's employment mandate, most others are still more concerned about inflation. Uncertainty over how tariffs will affect prices and how the central bank should respond was evident in projections policymakers issued in June: Of the 19 officials, 10 wanted at least two quarter-point rate cuts this year, and seven officials penciled in no reductions. Recent inflation reports showed price increases for some goods affected by tariffs, including toys and appliances. But underlying inflation also rose by less than expected in June for a fifth straight month, according to the consumer price index, suggesting price pressures aren't yet becoming broad-based. 'Given the post-Covid inflation playbook, some Fed officials are more cautious that tariffs might take longer to show up,' said John Briggs, head of US rates strategy at Natixis North America. 'The problem is for the Fed, you're just pushing off that data clarity, and this constant delay is just delaying the Fed's resolve.' Natixis expect the Fed to resume its easing cycle in October and to continue with a series of quarter-point reductions through June 2026. Press Conference In his press conference, Powell will almost certainly face questions about tariffs and inflation. He's likely to remain cautious, repeating his message that officials have an obligation to maintain price stability with inflation still running above the Fed's 2% target. The Fed chair could also acknowledge that better-than-expected data and recently-announced trade deals reduce the likelihood of a worst-case scenario for inflation, echoing comments by other officials in recent weeks and opening the door to a September cut. By the time policymakers gather September 16-17, they'll have two more jobs reports in hand, along with more data on inflation, spending and housing. By then, according to Andrzej Skiba at RBC Global Asset Management, officials may be in a position to lower rates unless there's an aggressive escalation of tariffs or inflation data surprises to the high side. So far, however, economists have been left to puzzle over why tariffs haven't made a bigger impact on prices. A range of factors could be at play, including moves by businesses to build inventories before tariffs hit and burden-sharing across the supply chain, said Gregory Daco, chief economist for EY-Parthenon. 'I would anticipate that Chair Powell is going to highlight these mechanics and highlight that these cost pressures are starting to show up, but still maintain an even-keeled narrative,' Daco said. Powell has faced extraordinary pressure from Trump this year, including threats of termination. Republicans' attacks on the central bank in recent weeks have homed in on its $2.5 billion building renovation project, culminating Thursday in a tour of the construction site by Trump himself. The Fed chair will probably field questions from reporters Wednesday about the attacks, though he will likely keep his message focused on the economy. 'Chair Powell's binder of prepared answers to predictable questions will be thick with material that has nothing to do with monetary policy,' Feroli wrote in his note. 'We expect that all of these will be wasted opportunities by members of the press corps, as Powell will repeat that he is focused on the job Congress has given him.' --With assistance from Maria Eloisa Capurro, Michael Mackenzie and Ye Xie. Burning Man Is Burning Through Cash It's Not Just Tokyo and Kyoto: Tourists Descend on Rural Japan Confessions of a Laptop Farmer: How an American Helped North Korea's Wild Remote Worker Scheme Elon Musk's Empire Is Creaking Under the Strain of Elon Musk A Rebel Army Is Building a Rare-Earth Empire on China's Border ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
3 days ago
- Business
- Bloomberg
Fed Is Set for Contentious Debate as Investors Eye Fall Rate Cut
By and Catarina Saraiva Save Federal Reserve officials are determined to hold interest rates steady a little while longer, though an increasingly contentious debate at this week's policy meeting may bolster expectations for rate cuts in the fall. Fed Chair Jerome Powell is under intense pressure from President Donald Trump and his allies to reduce borrowing costs, and may face multiple dissents this week from officials who want to provide support to a slowing labor market.
