While it is a foregone conclusion that the Federal Reserve will announce a rate cut on Thursday afternoon, the only real mystery is how big the cut will be.

The 12-member Federal Open Market Committee (FOMC) began meeting Wednesday to examine economic data and discuss how much to cut the federal funds rate, which is the rate that commercial banks charge between themselves for overnight loans. That rate trickles down to the general economy in many ways, including influencing bond rates, which, in turn, influence home loan rates.

The FOMC is expected to announce a 25 basis-point cut on Thursday afternoon, according to Reuters, which surveyed 111 economists and found that 90% predicted the Fed would cut 0.25% at this meeting and at the next meeting in December, bringing rates down to 4.25% to 4.50% by the end of the year. The Fed has also signaled plans for more interest rate cuts next year that could bring the fed funds rate down to 3.00%-3.25%.

But not everyone expects that the quarter-point reduction now will do much to tamp down interest rates, which have shot up in recent weeks to above 6.7%, denting hopes for a housing rebound.

“While the market is pricing in a 0.25% rate cut by the Fed, which it will likely get, mortgage rates may not respond directly,” said Emanual Santa-Donato, senior vice president and chief market analyst for Tomo, an online brokerage service. “Instead, mortgage rates will likely be influenced by election results, which are expected to cause substantial volatility.”

The recent spike in interest rates has led Sen. Elizabeth Warren, D-Mass., and Sen. John Hickenlooper, D-Colo., to urge the Fed to cut interests rates by 0.5% for the second time in recent months. The lawmakers believe the larger cut will help ignite the struggling housing market and lower the cost of buying a home.

Sam Williamson, senior economist at First American Financial corporation, said that bond yields, which often move in anticipation of the Fed’s decisions on rates, have surged in recent weeks as investors have recalibrated their expectations on future interest rates.

“Consequently, mortgage rates have climbed more than 60 basis points, reaching 6.72 percent, after reaching their lowest level since February 2023 the week before last month’s FOMC meeting,” Williamson said. “This sudden rise likely further delays a potential recovery in the housing market, which is on track for its worst two-year period since the mid-1990s. However, over the next year we anticipate further, though gradual, declines in mortgage rates, consistent with the Fed’s longer-term projections on the future path of interest rates, which should help stimulate demand, and to a lesser extent, supply.”