Federal Reserve Leaves Rates Unchanged; Industry Economists Weigh In
The Federal Reserve June 17 held interest rates steady, maintaining the federal funds rate in its current range of 3.5%-3.75%.
“The FOMC kept its target rate unchanged, but the economic projections released today have shifted markedly relative to the projections in March, with the median member’s projection showing much higher inflation in 2026 and somewhat higher inflation in 2027. Not surprisingly, with elevated concerns about inflation and little sign of deterioration in the job market, the median member now projects an unchanged fed funds rate this year, but still expects some cuts over the next two years,” said MBA SVP and Chief Economist Mike Fratantoni.
“The vote to keep the rate target and balance sheet policy unchanged was unanimous. It will be very informative over the next few weeks to see whether there is still as wide a divergence of views across the FOMC regarding the appropriate stance of policy at this point. The overall tone is more hawkish than many had anticipated, and the immediate market reaction was an increase in rates. MBA’s forecast is for mortgage rates to average about 6.5% over the forecast horizon, given the resilience in the broader economy and job market, the likely stance of monetary policy given persistent inflation, and ongoing fiscal pressures, which will keep upward pressure on longer-term debt,” Fratantoni continued.
“Despite ongoing pressure on the Fed to ease ahead of the midterms, inflation remains the primary driver of policy decisions. While we expect administrative focus to zero in on housing affordability again–likely through increased incentives as sales continue to disappoint–elevated costs and borrowing rates will persist,” said Selma Hepp, chief economist for Cotality. “Importantly, regardless of Fed action, mortgage rates are unlikely to fall meaningfully until inflation cools and long-term yields move decisively lower.”
Click here or see the FOMC’s full statement below:
The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote:
The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4%, in support of the Federal Reserve’s dual mandate. The Committee reaffirmed its policy of maintaining ample reserves in the banking system.
Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
Inflation remains elevated relative to the Committee’s 2% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability.
