FOMC Keeps Rates Steady; MBA Economist Provides Commentary

The Federal Reserve’s Federal Open Market Committee left interest rates unchanged May 7.

“The FOMC held the federal funds rate target steady at its May meeting, dismissing the negative first-quarter GDP reading as solely due to volatility in international trade flows but noting that risks to its inflation and employment targets have increased given the heightened policy uncertainties,” observed MBA SVP and Chief Economist Mike Fratantoni.

“MBA forecasts that the risks to growth and the job market will wind up being the bigger concern this year, which will lead the Fed to resume cutting short-term rates in the second half of the year. Until then, the hard data on inflation and unemployment will continue to drive interest rates, including mortgage rates, from one end of a trading range to the other, with only a slight downward trend in mortgage rates over the remainder of 2025,” Fratantoni said. “Purchase mortgage application volume continues to run ahead of last year’s pace, and MBA forecasts that will be true for the year as a whole, even with the rate volatility we have experienced.”

The full FOMC statement reads:

Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2%. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Alberto G. Musalem; and Christopher J. Waller. Neel Kashkari voted as an alternate member at this meeting.