The Federal Reserve is taking a break from its war on inflation. After raising rates 10 times in 10 meetings in 2022 and 2023, the central bank made no change during its latest meeting. Fed Chairman Jerome Powell announced no further increase in the federal funds rate on June 14 — at least for now.
Earlier in the inflationary cycle, the Fed had enacted increases of as much as three-quarters of a point. Some think the central bank’s latest move could mark an end to this round of tightening. “Mortgage rates have generally increased in the past month, and this has slowed the pace of housing market activity, as potential homebuyers have been very sensitive to any changes in rates this year,” says Mike Fratantoni, chief economist at the Mortgage Bankers Association. “We expect that mortgage rates will drift down over the second half of the year as the economy slows and the Fed reacts accordingly by holding off on further rate hikes.”
However, many think this pause is just a break, and that the rate hikes will resume later this year as the Fed continues its quest to bring inflation down to 2%. “It is extremely unlikely that the Fed will back down from that goal, since they have been out so forcefully and consistently with the intent to reach that milestone,” says Lisa Sturtevant, chief economist of Bright MLS. “As a result, we’re probably going to see the Fed resume rate increases at its next meeting.”
