FOMC Maintains Target Range for Federal Funds Rate; MBA Economist Weighs In

As the market had anticipated, the Federal Reserve’s Federal Open Market Committee left the federal funds target range unchanged Wednesday at its January meeting. 

MBA Senior Vice President and Chief Economist Mike Fratantoni noted that inflation remains above the Fed’s target, and the job market, while softening, has not changed appreciably since the Fed’s December meeting. 

“Notably, there were two dissents at this meeting, both in favor of another 25-basis-point cut to the federal funds rate target,” Fratantoni said.

“While not a unanimous vote, there does seem to be a clear and consistent majority in favor of a pause in this rate-cutting cycle, a pause that likely continues unless or until the job market weakens further. With inflation remaining elevated, the FOMC majority does not seem in any rush to make further rate moves.”

Fratantoni said MBA’s forecast has been for mortgage rates to remain in a relatively narrow trading range for the foreseeable future, likely remaining between 6 and 6.5% for 30-year conforming loans. “The news from this meeting does not change our forecast for mortgage rates. We expect that this level of rates will help support a somewhat stronger spring housing market than last year, but not a breakout year.”

Read the Federal Reserve Board’s full statement below:

Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 3‑1/2 to 3‑3/4 percent. 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 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; Lisa D. Cook; Beth M. Hammack; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Anna Paulson. Voting against this action were Stephen I. Miran and Christopher J. Waller, who preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.