Chart of the Week: Target and Projected Fed Funds Rate

Source: Federal Reserve Board

The Federal Reserve remains on hold.

Federal Open Market Committee (FOMC) projections from the June 2025 meeting show that members expect increases in both the unemployment rate and inflation throughout the course of this year, as well as slightly weaker economic growth. At this point, neither trend warrants a change in the federal funds target. The FOMC statement continued to highlight the high level of uncertainty regarding the economic outlook, which also likely led them to hold to their current policy stance.

Another key highlight of the updated FOMC forecasts is that the median FOMC member still expects two additional rate cuts in 2025, ending the year with a fed funds rate upper bound of 4%, as shown in the chart. The median forecast for 2026 showed one fewer cut than had been the case in the March projections, which would leave the funds rate upper bound at 3.75% at the end of 2026. As noted earlier, these are the current median projections from the FOMC.

All in, a Fed on hold aligns with our forecast for little changes in mortgage rates for the time being. MBA data on mortgage applications continue to show modest increases in purchase application activity relative to last year, and we expect that trend to continue for the remainder of 2025 and into 2026. Mortgage rates fluctuating between 6.5% and 7%, combined with greater availability of homes for sale in certain markets around the country, should be a net positive for home buying. For refinancing, we continue to expect that borrowers will be opportunistic and act on periods of lower rates given the volatility in financial markets.

–Mike Fratantoni (mfratantoni@mba.org); Joel Kan (jkan@mba.org)