FOMC Commentary from MBA's Mike Fratantoni

The following is MBA SVP and Chief Economist Mike Fratantoni’s commentary following the Federal Reserve’s FOMC statement released this afternoon on monetary policy and the economy:

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“Inflation is coming down, but slowly. Multiple indicators suggest the economy here and abroad, will slow significantly in the near term, but the job market continues to appear resilient in the most recent data. With this muddled picture, it is not surprising that the FOMC held rates steady at its June meeting – but kept their options open for July and later this year.  Nevertheless, we expect that the Fed is at the top of its rate hiking cycle.

“The new set of economic projections shows that the median FOMC member expects two additional hikes by the end of 2023. Unfortunately, this only adds to the chances that the economy will slow sharply. Given the banking challenges that have already resulted in a tight credit environment, the threat of further hikes, baked in to medium-term rates today, will only further slow economic activity.  We expect that economic conditions will develop in such a way that further hikes are not needed, but this new information impacts markets immediately.

“Mortgage rates have generally increased in the past month, and this has slowed the pace of housing market activity, as potential homebuyers have been very sensitive to any changes in rates this year. We expect that mortgage rates will drift down over the second half of the year as the economy slows and the Fed reacts accordingly by holding off on further rate hikes.”