Federal Reserve Statement Explained – January 2025

Officials at the Federal Reserve (Fed) kept the target range for the federal funds rate at 4.25 – 4.5% to begin the year. It’s a sign that the Fed is in a wait-and-see pattern. The Federal Open Market Committee (FOMC) is laser-focused on both inflation and the unemployment rate.

In a relatively recent development, officials feel that risks to both inflation and the labor market are roughly equal in proportion. If you’re into reading tea leaves, and we are, this means that any further moves to lower inflation will be taken very carefully to try and avoid hurting employment substantially.

There’s some other extremely cautious language in here. Officials refer to the economic outlook being uncertain, with risks to its goals for both employment and price levels. There’s the usual data to look at. Changes in government administration also bring about new interplay between fiscal and monetary policy.

Regardless of what happens in the coming months, the goals for the Fed remain the same. They want to bring long-term inflation down to 2%. They also want low unemployment. Inflation is still higher than they would like it, but that’s being balanced against labor market impacts.

What This Means For Home Buyers

Stability is good. It would be better if rates were going down, but realistically, the Fed wants to move carefully because there can be long-term impacts on inflation to the upside from moving down too quickly. If people have more buying power based on lower rates, they can spend more. That drives prices up across the economy.

Unless the market is truly surprised, even had the Fed moved rates lower today, you typically don’t see an instant market reaction because bond traders try to anticipate what the Fed is going to do before it happens by about 2 months. That’s the lead time between your loan closing and a bond market sale.

What This Means For Those Refinancing

While everyone likes lower rates, the next best thing is stable rates. And what the Fed does isn’t as important as the way the market reacts. That’s what really moves rates one way or the other. Everything in this statement reads steady at the wheel. If you like the rate you see today, jump on it. There’s no reason to expect a wild swing lower.

More important than the rate really, is whether refinancing now is going to help you accomplish your goals. If that’s the case and you can afford the payment, go ahead and do it. If you’re reticent, there’s nothing wrong with waiting for a better time for you.

Are you ready to consider your mortgage options? You can get your application started today.