Fed Holds Rates Steady; Signals Cut Later
(Federal Reserve headquarters, Washington, D.C.)
The Federal Reserve’s Federal Open Market Committee held rates unchanged at its March meeting and continued to signal its next move will be a rate cut.
“The only question is when,” MBA Senior Vice President and Chief Economist Mike Fratantoni said. “Their new projections indicate three cuts for 2024, unchanged from their December projections for 2024, but with one less rate cut expected in 2025. We are forecasting that the first rate cut will be in June, and a total of three rate cuts this year.”
Fratantoni noted that the committee did not indicate any changes to the pace of quantitative tightening. “We continue to expect longer-term rates, including mortgage rates, to decline gradually over the course of this year,” he said.
Eric Orenstein, Senior Director with Fitch Ratings, New York, said the Fed’s announcement yesterday confirmed that–despite likely short-term rate cuts later this year–mortgage rates will not fall enough to drive meaningfully higher origination volumes in 2024. “Eventually, mortgage loan volumes should normalize with lower rates, though there are likely several more challenging quarters ahead for mortgage companies,” he said.
The full FOMC statement:
Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.
In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any 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 does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to 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; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.
