In a 7-3 vote today, the Federal Open Market Committee (FOMC) decided to cut the federal funds target rate by 0.25% to a range of 1.75% – 2.00%. This cut was heavily predicted by economists and financial institutions, taking no one by surprise. Two of the three dissenting votes were in favor of not making any cuts, while one dissenting vote was in favor of a larger .50% reduction.
Chairman Powell was non-committal in his commentary on the likelihood of future cuts. The language of the accompanying statement increased fears that Wednesday’s rate cut would be the final one of the year, while Fed funds futures markets have shown that investors expected at least one more rate cut between now and December 11, the interest-rate setting committee’s final meeting of 2019. The Fed also released a survey of Fed Board members and regional Fed bank presidents, which showed that the median respondent believes the Fed funds rate would be at present levels through the end of 2020.
Rates remain very low and the indications from the FOMC suggest that U.S. economy is still in a very good place despite global economic slowdown. Today’s rate cut was an attempt to continue our long lasting economic success, rather than a warning of potential recession or unfavorable economic conditions. Stable, favorable rates means homebuyers can qualify more easily with more purchasing power, or refinance their mortgages into a lower payment. Please contact an HFG Licensed Mortgage Professional near you if you’d like to learn more.