Will mortgage rates come down because of what the Fed did today?
Question of the week: Will mortgage rates come down because of what the Fed did today?
Answer: Yes, they did.
There was no “action” today be the Fed, but a significant event.
Today is the annual Jackson Hole Economic Policy Symposium hosted by the Federal Reserve Bank of Kansas City. Is JHEPS the acronym?
The main event of the symposium every year is a speech from the Chair of the Federal Reserve. This is likely Fed Chair Jerome Powell’s last JHEPS headline speech as President Trump has made no secret he will appoint a new chair for the Fed when Powell’s term is up in the spring of 2026.
Heading into this morning’s session, and Powell’s speech, markets were eagerly waiting to here if he supports lowering the Fed’s benchmark interest rate.
As usual with such speeches from Fed chair’s, it took a little reading of tea leaves to see what Powell supports; this is because Fed-speak can, and does, have major impact on markets globally.
This morning Powell opened the door for a rate cut, but did not step through it, and left room for the door to be shut on a rate cut.
Congress set a dual mandate for the Federal Reserve, promote conditions that result in the highest possible sustainable level of employment, and keep inflation low and predictable.
These two mandates are economically in conflict as high unemployment creates higher income, therefore more spending, which leads to more demand, and higher prices.
Because of the dual mandate, and the major economic swings we have had from the Great Recession, and then a decade after it ended Covid, the Fed has been walking a tight rope as it has enacted policies to stimulate, and then cool off, the economy.
Today, Powell spoke about part one of the mandate, the labor market. He said it might be softening enough to rein in inflation that is being pushed by tariffs. After spending the past year keeping its benchmark rate steady, stating the strong labor market and uncertainty about inflation did not warrant a change, it appears that the chances for a rate cut in September is pretty high.
In Fed speak, “the balance of risks appear to be shifting…it is a curious kind of balance that results from a marked slowing in both the supply and demand for workers.”
Summation, the economic outlook “may warrant adjusting our policy stance.”
Back to our question, with the door open, rates are certainly responding as the chances of a rate cut by the Fed indicates lower rates for other fixed rate instruments, such as mortgages.
That said, how much impact over time is not yet know as mortgage rates are not set by the Fed, but investors do consider the Fed’s moves when determining what interest rates they require for their investments.
During the current easing policy with the Fed lowering its rate starting in July 2023, we have seen mortgage rates decline, but not with the same rate of decline as the Fed’s rate.
So, today’s comments by the Fed did have an immediate impact on rates as they hit their lowest since the first week of April, which at the time was a four-month low; only to be followed by a 0.75% (three-quarters of one percent) jump in rates the following week after Trump’s initial tariffs declaration.
Moving ahead, mortgage rates movement will continue to be set by investors as they interpret economic data that has impacts on the labor market and inflation.
Have a question? Ask me!
Rates for Friday August 22, 2025: Slow week for economic data as all eyes and ears where focused on Jackson Hole and today’s speech by the Fed Chair. As mentioned, rates at a four-month low.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:
30 year conforming 6.25% Down 0.125%
30 year high-balance conforming 6.375% Down 0.125%
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.
A weekend we have been looking forward to a while is here. Our youngest is coming home for a visit on Sunday. As they age and create their adult lives, the opportunities to see them becomes more scarce, and precisous.
