At its sixth meeting of 2023, the Federal Reserve decided to skip raising the Fed funds rate, which is the amount banks pay to borrow money from each other overnight. This was the Fed’s second skip amid 11 rate hikes instituted since the first quarter of last year in an attempt to rein in inflation.

This skip did not come as a surprise, as inflation and the job market have both slowed enough in recent months to prompt the Fed to hold rates steady and await more data. Despite ongoing volatility in energy markets, many economists and investors expect inflation to continue cooling off in the coming months, mostly due to lower car prices and rents.

This combination of factors gave Fed officials enough reassurance that they could skip a rate hike for now without causing a resurgence in price increases. However, there is growing consensus that another quarter-point hike could happen at the Fed’s next meeting in late October/early November. A lot will depend on the employment numbers and price indices (both consumer and producer) that are released before then.

What does the skip in Fed rate hikes mean to mortgage rates?

As we have pointed out in previous blogs about Fed rate increases, the Federal Reserve technically doesn’t determine mortgage rates. The rate of inflation has a much more direct impact on them, however. Skipping another increase in the Fed funds rate is a good sign that inflation is slowing, especially when supported by economic data. That combination generally puts downward pressure on mortgage rates.

If you’re looking to buy a home, there are steps you can take to get an even lower rate in today’s market. One of them is the option of an adjustable rate mortgage that has an initial rate that’s typically lower than a fixed-rate mortgage.

Remember: unlike the Fed rate, mortgage rates change daily and sometimes hourly. They still occasionally go down, despite the direction of the Fed rate and often in tandem with the rate of inflation.

The best way to navigate interest rates on home loans is to speak with a Homeowners Licensed Mortgage Professional about current market conditions. In any market situation, we’re here to help you understand the rates that are available to you and get the best possible pricing on your next home loan.

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