Wednesday marked Jerome Powell’s final meeting as Federal Reserve chair, with Fed policymakers voting to keep the benchmark rate unchanged at a range of 3.5% to 3.75% for the third meeting in a row. This decision comes amid rising inflation and a transition to new leadership under Fed Chair nominee Kevin Warsh.
“Today’s announcement of no interest rate change was simply a formality at this point, with no expected economic impact,” says Selma Hepp, chief economist for the real estate analytics platform Cotality, in a statement. “This was predictable, as the Federal Reserve is currently navigating a leadership transition amid a volatile global geopolitical environment.”
In the days leading up to the Fed’s April meeting, 30-year mortgage rates have held relatively steady in the low 6% range. And since the Federal Open Market Committee’s decision was expected, it’s unlikely to affect mortgage rates.
How Fed Policy Will Impact Mortgage Rates
Central bank policymakers vote on a short-term financing rate, which can have an indirect impact on long-term mortgage rates. The mortgage market tends to “price in” future rate cuts, acting in anticipation of future monetary policy. However, the Fed doesn’t set mortgage rates.
Instead, 30-year mortgage rates track the yield on 10-year Treasury bonds. The bond market is impacted by many of the same factors as the Fed’s monetary policy, notably inflation and employment.
Interest rates on borrowing products, including mortgages, have risen since the beginning of the U.S. war in Iran. Mortgage rates tend to be higher during times of high inflation, and the Middle East conflict has been putting upward pressure on oil prices, which has reverberated throughout the economy.
Although President Donald Trump has been eyeing rate cuts and is likely to continue calling for them from his Fed chair nominee, that doesn’t guarantee that the Fed will comply. Fed officials are unlikely to vote for a rate cut anytime soon, given that inflation is running well above the central bank’s 2% target.
In a post-meeting press conference, Powell emphasized that the Fed’s monetary policy isn’t likely to change drastically simply because of a new Fed chair.
“Monetary policy is going to get made by 19 people. There is a lot of stability there,” Powell says. “I mean, if you think about it, every new Fed chair has the same situation, which is you’ve got 18 colleagues on the FOMC. Eleven vote during any year. And your job is to create consensus.”
In the central bank’s latest projections materials, Fed policymakers expect one rate cut in 2026. Hepp says that “there is a high likelihood we won’t see any rate reduction until December at the earliest.” Mortgage rates are also likely to stay relatively elevated in the meantime.
Century 21 Real Estate president and CEO Mike Miedler agrees, alluding that borrowers should focus on things within their control.
“The Fed’s decision to hold rates today doesn’t surprise me, but it does reinforce something our agents tell buyers all the time: Borrowing costs aren’t going away anytime soon, so the smartest thing you can do right now is get prequalified, talk to your lender about rate locks or buydowns, and be ready to move when the right home comes along,” Miedler says in a statement.
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Interest Rates Steady After Powell’s Last Meeting as Fed Chair originally appeared on usnews.com