June 2024 FOMC Meeting: No Change to Fed Funds Rate

In the just-released FOMC statement, the Fed announced no change to the Fed funds rate. This was in keeping with consensus market expectations. The Fed funds range remains set at 5.25% to 5.50%, a 23-year high and where it’s been for the past seven FOMC meetings.

The primary Fed guidance the market is looking for today will come from the consensus of the refreshed “dot plot” projections for future Fed funds rate cuts each Fed Governor is providing at this meeting. Given the friendly May CPI numbers released early this morning, expectations are the consensus projections will indicate two 25bps Fed funds rate cuts before year-end. Investors will also be looking to see if any of the Governors project a third 2024 cut, and at the dot plot indications for cuts in 2025.

Any wording changes to the just-released policy statement and from Fed Chair Powell’s press conference also hold the potential to move markets. This morning’s CPI data gives Powell the leeway to present a dovish tone in his inflation remarks. That tone, together with how it coincides with any changes to the dot plots, could accentuate the mortgage rate movement we’ve already seen today.

What’s Next?

Investors are focused on how many times the Fed is planning to cut the Fed funds rate in 2024. Before today, the ongoing strength of the economy, job market demand, and inflation picture had the Fed broadcasting they were firmly in a holding pattern on rates. The dot plot rate cut projections then are a matter of conditions changing enough for the Fed to move off its “higher for longer” stance. That will still take several months of fresh economic data to play out, with the inflation factor being the primary determinant. Today’s May CPI numbers did pull rate cut projections forward. The market has to decide how far and to what degree.

This time of year, the Fed calendar starts to play into this calculus for market investors. After the next FOMC meeting on July 31, there is a longer stretch until the following meeting on September 18. In between the Fed will gather at its annual Jackson Hole conference in late August. But the Fed has stuck to making policy changes at the conclusion of the FOMC meetings and no policy action is expected from Jackson Hole. That leaves time for the market to digest multiple months of economic news into its market actions before the first cut is expected to be made.

Before the next FOMC meeting on July 31, we have additional economic indicators coming. Meanwhile, there’s the war in the Middle East, the war in Ukraine, gas prices, China’s economic situation, continuing jobs market strength, a still expanding economy, and the increased Treasury auction calendar, not to mention the inflation picture. All of which factor into day-to-day market movement volatility. Those factors come between the longer timing of interest rate projections and the shorter lock period timing consumers face as they work with Loan Officers to secure mortgage financing to close on property purchases. Because of this timing mismatch, and with housing inventory an ongoing issue, navigating rates remains in a volatile state.

What Do Borrowers Do Now?

Originators should explain to borrowers looking to finance the purchase of a home that the current mortgage rate market remains exposed to greater-than-typical levels of uncertainty. Mortgage rates have turned lower today, but they will be repriced daily in a volatile economic news and bond auction environment.

The available housing inventory is still tight and will remain so for years to come. After finding a home for purchase and achieving an accepted offer, the best course of action is to secure financing quickly to avoid the worst of possible market volatility that could upend those plans.