As expected, the Federal Reserve held the benchmark interest rates steady on Wednesday at its first meeting since President Donald Trump retook office.
The decision was unanimous, leaving the target range at 4.25% to 4.5%. The Federal Open Market Committee gave no indication on the next rate cut.
“Recent indicators suggest that economic activity has continued to expand at a solid pace,” the Fed said in a statement. “The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
The Fed had cut its benchmark interest rates by 100 basis points over the last three meetings at the end of last year. At its December meeting, the committee also signaled another two cuts this year.
“The Fed’s pause on rate cuts confirms what treasury yields have been telling us — inflation risks are likely to keep mortgage rates high in the near term,” said Eric Orenstein, senior director, Fitch Ratings, in a statement. “Mortgage refis could still pick up if long-term rates fall around 75 bps, but there is clearly less momentum than there was even three months ago.”
It would be a “pleasant surprise if mortgage rates dip to 6% in 2025,” said David Sober, senior vice president of Enterprise Business Development at Voxtur Analytics, in a news release.
“The Fed’s decision to keep rates untouched is likely a long-term trend, with interest rate reduction not expected until the second half of the year,” Sober said. “This keeps the housing economy in an extended period of malaise, with affordability at its lowest point in memory.”
The decision shows that the nation’s economy remains resilient against long-term economic setbacks, said Selma Hepp, CoreLogic’s chief economist, said in a statement. She said the current economic growth makes the case less compelling to loosen monetary policy in the coming months.
“Nevertheless, there are sectors of the economy, such as the housing market and pockets of the income spectrum, that are challenged by high rates and overall high prices,” Hepp said. “And, with mortgage rates expected to remain higher for longer and with limited inventory, existing home sales activity keeps reaching new lows.
“In contrast, home builders have added more new homes last year and continue to offer rate buydowns on new construction, keeping those sales strong.”