By KIMBERLEY HAAS
In a move that was not surprising, members of the Federal Open Market Committee held the target range for the federal funds rate steady at 5.25% to 5.5% at their meeting this week.
Inflation has eased over the past year but committee members do not believe it will be appropriate to reduce rates until they have gained more confidence inflation is moving sustainably toward 2%, which has been their goal.
Federal Reserve Chair Jerome Powell said during a press conference on Wednesday afternoon that inflation may not reach 2% until 2026 but it is likely rates have hit their peak and the committee plans to start dialing them back at some point this year.
Powell did not indicate when that might be, saying they will continue to make their decisions meeting by meeting. He added that FOMC participants have provided individual assessments of an appropriate path moving forward.
“If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6% at the end of this year, 3.9% at the end of 2025, and 3.1% at the end of 2026,” Powell said.
Powell said recent indicators suggest that economic activity has been expanding at a solid pace. GDP growth in 2023 was at 3.1%. However, he acknowledged the housing market has slowed due to the cost of borrowing.
“Activity in the housing sector was subdued over the past year, largely reflecting high mortgage rates,” Powell said.
What does this mean for the housing market as the spring homebuying season begins?
It may be some time before the federal funds rate is cut but that does not mean mortgage rates will remain at high levels through the spring and summer, which is peak homebuying season.
CBS News Business Analyst Jill Schlesinger said the Fed does not directly control mortgage rates, and because they are likely to cut rates this year, mortgage rates are probably going to come down.
“Right now, mortgage rates are at 6.75%, about, for a 30-year fixed rate mortgage. Now, that is not as high as it was last year. We went up to nearly eight, but it’s not where we really want it to be to bring new homebuyers into the market,” Schlesinger said on CBS Mornings.
Schlesinger also responded to a question about the $418 million settlement agreement the National Association of Realtors reached last week. She said it could bring a huge change to the industry.
“We may see more than half of the one-and-a-half million realtors that are associated with the National Association of Realtors drop out because they’re not going to make enough money. This is supposedly going to put pressure, downward pressure, on commissions that are paid,” Schlesinger said.
Schlesinger said she does not think housing prices will drop as a result of the settlement due to a lack of inventory.
The FOMC meets again on April 30 and May 1.
Read More Articles:
NAR Settlement Poses Challenge For VA Buyers
National Association Of Realtors Reaches $418M Deal That Changes Compensation
Fed Not Likely To Cut Rates Anytime Soon
Sign up for our free newsletter.