Fed continues holding pattern

During the March meeting of the Federal Open Market Committee, the Fed decided to hold short-term federal funds rate at a top rate of 3.75%. This decision continues the easing cycle pause from the January meeting.  The Fed has not eased or raised rates since September.

“The Federal Reserve is likely to remain on hold as the economy continues to absorb a series of ongoing shocks. Government shutdown risks, tariff uncertainty, and geopolitical tensions in the Middle East are all weighing on economic momentum,” Dr. Selma Hepp, Chief Economist, Cotality predicted before the decision.  While many of these forces are beyond the Fed’s control, monetary policy remains its primary lever. With signs of labor market softening alongside renewed pressure on household essentials like food and fuel, policymakers have little incentive to adjust interest rates amid an increasingly uneven and uncertain outlook.”

The Fed noted in their March statement that these economic uncertainties played a heavy role in the decision. The committee stated that they are strongly committed to decreasing inflation and supporting a stronger employment rate.

“While reductions for the federal funds rate do not have a direct effect on mortgage interest rates, which remain slightly above 6%, federal funds rate reductions do lower interest rates on builder and developer loans, helping the supply-side of the housing market,” said Robert Dietz, Chief Economist, National Association of Homebuilders. “Supplying more housing and at lower cost is key to solving the ongoing housing affordability challenge. Lower financing costs are part of the overall solution.