Fed Cuts Rates to Lowest in Three Years

The Fed cut interest rates by 25 basis points today, putting the target federal funds rate in the range of 3.50% to 3.75%. The recent peak was 5.25% to 5.50% in July 2023.

Additional cuts in the near term could be more difficult as the committee members were already divided on this decision to lower rates. More data indicating substantial weakness in the labor market and economy will likely be needed to sway future votes.

Ahead of the vote, ADP estimated that employment in the private sector declined by 32,000 jobs in November and small businesses took the brunt of the losses. Yesterday’s BLS report noted a slight uptick in layoffs in October, and multiple prominent companies announced terminations in November.

Consumers hoped that the cuts by the Fed the last year-plus would instantly lead to significantly lower mortgage rates, but the declines have been more modest. The average 30-year fixed-rate mortgage was still 6.19% last week according to Freddie Mac, and it has not been below 6% since September 2022.

Mortgage rates tend to more closely follow the 10-year Treasury’s longer-term yield, which has remained elevated for a variety of reasons, including anticipated inflation impacts.

Explore our webpage for more insights and resources:
https://bit.ly/Radix_Website