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On Dec. 10, the Federal Reserve voted to lower the federal funds rate by 25 basis points. A basis point is one one-hundredth of a percentage point. Mortgage lenders had been expecting a cut, and mortgage rates had fallen in the weeks ahead of the meeting.
This move was largely predicted by analysts, despite tensions among central bankers. Still, the path to cutting was not unanimous or obvious. While some committee members, like New York Fed President John C. Williams, had publicly voiced support for a cut, others, including Chicago Fed President Austan Goolsbee, raised concerns about inflation.
One reason for these divisions is the lack of recent federal data, which creates a murkier view of the economy. The Consumer Price Index and jobs report were both canceled for October, and November’s data isn’t scheduled for release until next week. This means the most recent federal employment and inflation data available to the central bankers was from September, making the Fed’s decision far trickier than normal.
What to expect from mortgage rates
Mortgage rates already fell ahead of this December meeting, so they won’t fall again just because of today’s decision. The Fed doesn’t set mortgage rates, but it does set the federal funds rate, which banks pay to borrow from each other. When the federal funds rate gets reduced, it can lower lenders’ borrowing costs, so mortgage rates often go down when a cut is expected.
Next week the Bureau of Labor Statistics will release key new data that might affect rates moving forward, as the November jobs report comes out on Dec. 16 and the Consumer Price Index will be released on Dec. 18. These will give analysts a pulse-check on the economy.
If employment and inflation are both down, we can expect the conversation around the Fed’s planning for 2026 to lean toward another rate cut, potentially pushing mortgage rates down further.
If employment and inflation are both up, central bankers will be less likely to cut again, and mortgage rates could rise.
If employment and inflation are moving in different directions … well, we can expect that central bankers will continue to disagree about which matters more, and mortgage rates might shift based on public commentary by Fed leaders.
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