Federal Reserve Holds Interest Rates in Place; Keeps Near-Term Projections to Three Cuts

As widely expected, the Federal Reserve held its key interest rate at a range of 5.25% to 5.50%, keeping upward pressure on borrowing costs for many forms of credit. The Fed has been keeping its influential fed funds rate high in an effort to force down high inflation, which has fallen significantly over the last two years. However, inflation is still not to the Fed's goal of a 2% annual rate. Officials have said they need more confidence that inflation is sustainably moving down. While inflation has been stickier than expected in recent reports, it's just a bump in the road, Chair Jerome Powell said in his press conference following the rate decision. "I think they (inflation reports) haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%,” he said. “I don't think that story has changed. I also don't think that those readings added to anyone's confidence that we're moving closer to that point.” Fed officials also released their quarterly summary for economic projections and maintained their previous average projection of three cuts by the end of the year. Officials did however, take one of the expected rate cuts for next year off the table. "The belief that fewer cuts are needed next year likely suggests that the central bank is assigning a higher probability of a soft landing, or where it returns inflation to target without pushing the economy into a recession," wrote Oxford Economics chief U.S. Economist Ryan Sweet.

Read more about today's decision here.

Mortgage Applications Dip as Loan Size At Nearly Two-Year High

Home loan applications continued to move in line with mortgage rates, as fewer potential homebuyers sought mortgages last week.

The Mortgage Bankers Association (MBA) Market Composite Index dipped 1.6% for the week ending March 15, reversing last week’s gains on a bump in the 30-year fixed-rate mortgage rate to 6.97%. 

“Mortgage rates increased last week as incoming data showed inflation was still hotter than expected, which stoked concerns about the timing and extent to which the Fed might be able to reduce the fed funds rates this year,” said Joel Kan, MBA vice president and deputy chief economist.

Application levels for both new purchases and refinancing were both lower. The average loan size for purchases was $445,000, the highest level since May 2022, MBA reported.

-Terry Lane