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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“The FOMC voted to cut the federal funds rate target by another 25 basis points today, but the three dissents highlighted just how divided the Committee is with respect to future rate cuts. As in the prior meeting, there were dissents on both sides of the decision, with Governor Miran voting for a 50-basis-point cut and two FOMC members voting for no change.

“Inflation is well above the Fed’s target, but the job market appears to be softening, even as data to confirm that trend is still delayed due to the recent government shutdown. Thus, there is ammunition for both sides of the debate within the FOMC.

“The projections published from this meeting show the Committee does not see a clear path, with members indicating slightly faster growth, but similarly elevated inflation and a fed funds rate path that matches the September projections.

“The FOMC announced an end to quantitative tightening at its last meeting, which took effect on December 1.  At this meeting, they announced that they will begin to add to their Treasury bill holdings, as needed, to sustain market liquidity.

“Mortgage rates have inched higher over the past week, slowing the pace of refinance applications at a time of year when the purchase market typically slows sharply. Our forecast is for mortgage rates to stay within a fairly narrow range over the next few years. This forecast becomes more likely as the Fed reaches the end of their cutting cycle next year.