Despite Trump Pressures, Federal Reserve Holds Rates in July

Fed holds in July

No change to the the federal funds rate in July, as the Federal Reserve continued its method of caution and patience through turbid waters.

Between inflation rising for the second straight month and the unstable geopolitical landscape, the central bank decided to wait.

“In the absence of political sway, inconsistent data on the slowing of employment and insufficient data on the tariff impacts” kept the Fed from making a cut, according to Selma Hepp, chief economist at Cotality.

How will mortgage rates react to the Fed news?

Interest rates typically rise alongside increases to the fed funds rate and decline after cuts. However, mortgage rate movements varied in the immediate aftermath of the most recent Fed decisions.

The day following each of the last two rate cuts in November and December, the average 30-year fixed-rate mortgage (FRM) respectively decreased one (0.01%) basis point and jumped 12 (0.12%) basis points week-over-week, according to Freddie Mac. After January, March, May, and June’s rate holds, the 30-year FRM dipped one (0.01%) basis point, rose two (0.02%), stayed flat, and fell four (0.04%) from the week prior.

Over the last three months, rate movements occupied a relatively narrow band. The average 30-year FRM oscillated between 6.62% and 6.89% from March 27 to July 24. This fifth-consecutive Fed hold will likely provide upcoming borrowers with similar interest rates for the near future.

In its post-meeting statement, the FOMC said economic activity moderated over the first half of the year, with low unemployment, solid labor conditions, but somewhat-elevated inflation.

The inflation rate progressed toward the FOMC’s 2% goal to begin 2025, before most recently growing to 2.7% in June from 2.3% in April, according to the Bureau of Labor Statistics. The Fed has stood adamantly by its need for sustainable, decelerating inflation for a cut to be called for. A Fed cut followed by decreasing mortgage rates would surely be a welcome sign for house hunters, many who paused their search due to lack of affordability.

“I think if mortgage rates do move, you’ll see a pretty immediate surge in demand from buyers. There are a lot of people on the sidelines,” said Tim Lawlor, chief financial officer at Kiavi.

“If you want to position yourself now, be educated in the market you’re looking to buy into. And then, how would a change in mortgage rate affect your affordability? Look into having a preapproval and relationship with the lender. The preapprovals might only be for 30 or 45 days, but it is a lot easier to constantly refresh with that lender as mortgage rates come down rather than starting from scratch, particularly when these mortgage originators become busier and busier.”

The Fed’s role and July’s FOMC meeting

At its July meeting, the Federal Open Market Committee (FOMC) voted in a 9-3 majority to maintain the federal funds target range. This decision marks the fifth-straight hold, following January, March, May, and June.

In addition to keeping the fed funds rate steady, the FOMC will continue reducing its Treasury securities, mortgage-backed securities, and agency debt. The committee said it’s prepared to adjust its policy stance based on new data and evolving outlooks.

The U.S. annualized inflation rate hit a 41-year high of 9.1% in June 2022 and the Fed began taking action to tame it. Since 2024, inflation mostly followed a downward trajectory, ranging between 2.3% and 3.5%. Although the inflation rate sits lower overall from 3% in January, it’s grown the last two months to 2.7% in June. It continues to remain above the Fed’s long-term goal of 2%.

President Trump and his administration have scrutinized the Fed, and Jerome Powell in particular, calling the central bank chairman a “fool” and “numbskull,” and openly asking for his resignation if a cut doesn’t come.

In addition to the Fed’s actions, multiple economic and geopolitical factors influence mortgage rates. While the central bank technically doesn’t set mortgage interest rates itself, its monetary policies do intrinsically correlate with mortgage rate movements.

The latest projection materials showed the majority of FOMC members believe at least one rate cut will happen in 2025. The next FOMC meeting takes place on September 16-17, 2025.

Should you lock in a mortgage rate?

Being influenced by a bevy of factors make mortgage rates subject to high volatility — especially in volatile times.

Although projections can (and do) shift with new information, the FOMC’s latest action signaled the economic forecast needs more stability and sustainable inflation cooling before another rate cut can be made. If the pace of inflation keeps slowing while employment remains healthy, additional cuts could be on the horizon.

“Focusing on long-term affordability and local market dynamics is always a better strategy than timing the market,” said Tim Lawlor, chief financial officer at Kiavi. “If the numbers work now, it’s worth consideration, especially given the potential for increased competition if/when rates begin to fall.”

Regardless of where rates go, you should always negotiate and get creative in budgeting. Building home equity is one of the most common ways to gain wealth and biggest advantages of owning property.

If you’re ready to begin your path to homeownership, talk to a local mortgage professional to see what rates and loan types you qualify for.