The Fed held rates steady on Wednesday, as expected, and appears to be in no hurry to resume cuts. Mortgage rates are expected to remain unchanged.
After cutting for three meetings in a row, the Fed decided to hold their policy rate steady and they see no reason to cut further until inflation comes down more. The decision was largely expected and already priced in—based on the forecast released at the December 18 meeting. In light of recent economic data, the Fed is now more concerned with inflation getting stuck above target than labor market weakness. This is a meaningful change from their view in the fall. As such, they are hesitant to commit to further cuts until there is more progress on inflation. Futures markets currently do not expect another rate cut until June.
On tariffs, immigration, fiscal, and regulatory policy, the Fed does not expect to adjust their plans until there are more concrete changes to react to. When asked about mortgage rates increasing by one percentage point at the same time the Fed cut by one percentage point, Chair Powell attributed the rise in mortgage rates to tariffs and fiscal policy rather than monetary policy.
Mortgage rates will remain largely unchanged today as there was little new information from this meeting, but new jobs data on February 7 could bring volatility.
