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Industry Responds to Second Rate Cut

The Federal Reserve approved another rate cut, taking down its benchmark overnight lending rate to a target range of 1.75% to 2%. The Fed said in its policy statement that it was cutting rates “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.”

Despite the rate cut, which had been anticipated since the rate cut earlier this year, Reuters reports that seven of 17 policymakers projected one more quarter-point rate cut in 2019, signaling divisions in the Fed.In a statement, Nigel Green, founder and CEO of deVere Group, discussed the uncertainty around future rates.

“Despite immense pressure from President Trump to cut rates further, to provide rocket fuel to the economy ahead of next year’s election, the Fed appears conscious that the labour market is tight and fears wage inflation will kick in,” Green said. “Also, with the U.S. economy experiencing around 2 per cent growth, which is fairly decent, the Fed is exercising caution over further precautionary rate cuts at this time.”

Ruben Gonzalez, Chief Economist, Keller Williams also discussed the uncertainty within the Fed. 

“Market anticipation of the Federal Reserve’s actions has already impacted long-term rates, which influence mortgage rates,” Gonzalez said. “Unless we see an increase in uncertainty around Fed policy decisions, we don’t think we will see a lot of movement in mortgage rates happen as a result of Fed policy announcements.”

How will the rate drop impact mortgage rates in the near future? In a statement realtor.com’s Director of Economic Research Javier Vivas discussed current market conditions and what to look for in the wake of rate cuts.

“The cut in the Fed’s short term rates is unlikely to lead to noticeable drops in mortgage rates over the immediate horizon,” Vivas said. “Rates remain about a percentage point lower than a year ago. However, despite higher purchasing power, consumers faced declining housing inventory in August, especially at the entry level. For buyers, today’s vote removes the urgency to sign a purchase contract, as expectations of continuing low mortgage rates collide with increasing clouds over the economic horizon.”

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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