Several things happen on Fed Day–especially on the 4 out of 8 examples with updated rate
forecasts from Fed members. The official announcement of a rate cut is typically the least
important aspect. In fact, it is usually entirely unimportant in terms of its impact on
mortgage rates.
Instead, the bonds that determine mortgage rates are much more likely to react to the Fed’s
dot plot (the chart showing each Fed member’s rate forecast over the next few years) and the
press conference with the Fed Chair.
The dots are released at 2pm at the same time as the rate cut announcement. The press
conference follows at 2:30pm and usually lasts 50 minutes. This staggered timing makes for
plenty of back-and-forth volatility on occasion and today was a prime example.
The dots helped bonds because they signaled better odds for two additional cuts in 2025 as
opposed to only one. The market was mostly expecting that, but it wasn’t fully priced-in to
prevailing rates. Things changed during Powell’s press conference and bonds ended up more
than reversing the initial move.
Powell framed today’s cut as a “risk management” cut and emphasized that the forecasts in
the dot plot do not represent a plan for future cuts. Rather, the Fed will continue to take
things on a meeting-by-meeting basis and make decisions based on the new data that becomes
available over that time.
As the underlying bond market responded, most mortgage lenders issued mid-day changes to
the rates announced this morning. The net effect is that mortgage rates are most certainly HIGHER this afternoon compared
to yesterday’s latest levels, not to mention this morning’s.
© MBS
Whitney Fite
SVP, Area Manager, Capital
City Home Loans
wfite.cchl.com
P: (470) 226-2160
M: (770) 596-0576
1020 Parkside Commons Suite 102
Greensboro GA 30642
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