A divided Federal Reserve held the line on interest rates Wednesday and indicated formally that no cuts are coming in 2019. The decision came amid divisions over what is ahead and still leaves open the possibility that policy loosening could happen before the end of the year depending on how conditions unfold.
The central bank predicts one or two rate cuts in its set of economic predictions, but not until 2020. Despite cautious wording in the post-meeting statement Wednesday, markets are still betting the Fed cuts, as soon as July.
These statements and what has been going on in the Whitehouse has caused the Bond and Treasury markets to rally hitting 2 year lows. As a result, mortgage rates are hitting new lows everyday. We are seeing the 30 year fixed rate at 3.75% with 0 points. A rate we have not seen since 2017!
The U.S. central bank voted Wednesday to maintain its benchmark interest rate in a range of 2.25 percent and 2.5 percent, a move that many anticipated despite growing calls for the Fed to cut. But eight out of 17 officials penciled in rate reductions by the end of this year, which would be the first such adjustment since the economy plummeted into the depths of the Great Recession.
Language in Fed Chair Powell’s dictates the markets
The committee changed language from its May statement to indicate that economic activity is “rising at a moderate rate,” a downgrade from “solid.”
In their baseline scenario, FOMC members said they still expect “sustained expansion of economic activity” and a move toward 2% inflation but realize that “uncertainties about this outlook have increased.”
“In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective,” the statement said. The “act as appropriate to sustain the expansion” language mirrors a statement from Powell in early June.
These may seem very subtle to most, but the slight change of “Moderate” to “Solid” speaks volumes to Wall Street. Wall Street is betting on future rate cuts and the markets are reacting positively!
Mortgage Rates Continue to Drop!
With the recent news of the Feds today, mortgage rates continue the rally. The 30 year fixed rate with 0 points 3.75% based on a 740 credit score on a single family home with 25% equity. For more details about rates and terms, call or email me anytime!
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