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Mortgage Rates Hold Steady Again: What the Fed’s Pause Means

Welcome back to the Mortgage Rundown.  We are going to talk about what’s happening with interest rates.

Here we are, almost in August, and the U.S. Federal Reserve still hasn’t moved interest rates once in 2025.  At its July meeting, the Fed left the overnight rate unchanged, still in the targeted range of 4.25% to 4.5%. 

The economy is still proving to be resilient and the unemployment rate is hovering right around 4.1%.  Recall that a year ago the unemployment rate was at 4.2%.

So, even with all of the disruptions related to tariffs and a Fed policy rate that has been restrictive, neither the economy nor the job market have felt much of a material impact.

As far as U.S. Treasury rates are concerned, the 10-year Treasury yield is still hovering around 4.35%. It has been pretty stable for the past few months.

In terms of rates for the remainder of the year, in the June meeting, we did see the Fed’s dot plot.  Just as a refresher, every other meeting each member of the committee forecasts where they expect the benchmark rate will be at the end of this year, next year, 2027, and their long-term view of the Fed Funds rate. 

Now, the median value of each forecast suggests that the Federal Reserve would expect to lower rates by 50 basis points (aka half a percentage point) later this year. 

However, if you look at all of the forecasts, represented by their dots, seven committee members expect no change to the key rate this year. Only two expect a 25 basis point drop. 

That means almost half the members of the FOMC expect very little to no movement in rates in 2025, which is somewhat at odds with the market.

That is definitely something we should keep an eye on at the September meeting, when the Fed updates its forecasts.

That’s it everyone from the capital markets desk this week.  Thank you all for watching and have a great day.