Article Summary
Economists surveyed by Wolters Kluwer expect the Federal Open Market Committee to reduce short-term rates in 2025, although none anticipate a hike. The consensus average regarding the size of a rate reduction for all of 2025 is 60 basis points, down from 65 basis points in the previous survey. The latest survey was conducted on May 5 and 6, concluding after the FOMC announced it was taking no actions. Most panelists anticipate a 25 basis point cut, while a smaller portion expects a 50 basis point reduction.
What This Means for You
- Understand the impact of the FOMC’s rate decisions on long-term interest rates, such as 10-year Treasury yields, which can indirectly influence mortgage rates.
- Stay informed about the FOMC’s future actions, as short-term rate cuts may be influenced by the U.S. economy’s overall performance, inflation, and unemployment rates.
- Monitor ongoing developments and announcements related to trade tariffs and agreements, as they can impact the yield curve, influencing both short-term and long-term interest rates.
- Keep an eye on inflation expectations, which will likely be a significant factor in policymakers’ decisions moving forward.
Original Post
Economists surveyed by Wolters Kluwer remain solidly behind the notion that the Federal Open Market Committee will reduce short-term rates in 2025.
Its May Blue Chip Economic Indicators report even included the possibility that the Fed could actually raise interest rates in 2025 based on comments made by Chairman Jerome Powell, which the authors noted could open the door to such a move.
None of those panelists, however, are expecting a hike. But the consensus average regarding the size of a rate reduction for all of 2025 came out at 60 basis points, down from 65 basis points
The latest survey was conducted on May 5 and 6, the second day being the start of the FOMC meeting; after it concluded, the Fed announced it was taking no actions.
If not now, when will the Fed cut rates?
The survey found that 20% of the respondents believe the next cut will be in June, with 29% in July and 51% starting even later. Approximately 9 out of 10 expect a 25 basis point cut, with 10% at 50%,
The report did come out before
On the China news, the 10-year Treasury closed on May 12 at 4.46%, up 8 basis points on the day. On May 1, the yield was at a low of 4.12%.
Meanwhile, the 30-year fixed on Monday afternoon was just shy of 7%, at 6.97%, according to Zillow. The Lender Price rate tracker on the National Mortgage News website was at 6.95%. Both
Is the U.S. heading for a recession soon?
An April 9 announcement of a 90-day pause in reciprocal tariffs with other countries did not
Key Terms
- Federal Open Market Committee (FOMC)
- Short-term rates
- Inflation expectations
- Yield curve
- Trade tariffs
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