The Federal Reserve left the federal funds rate unchanged on Wednesday, Oct. 28, as markets had expected. The decision may have limited immediate impact on mortgage rates, but it does not rule out further increases. The average annual percentage rate on a 30-year fixed mortgage fell 10 basis points to 7.17% in the week ending Oct. 28, based on rates provided to NerdWallet by Zillow.
The next key indicator is the Personal Consumption Expenditures price index, the Fed’s preferred measure of inflation, due out on Thursday, Oct. 29. Policymakers did not have that report when they made their decision. If it shows inflation rising, mortgage rates could climb in the coming weeks, while a hotter reading could also strengthen the case for a Fed rate increase at its next meeting.
Inflation concerns have persisted: September’s Consumer Price Index report, released Oct. 14, put annual inflation at 3.7%. Meanwhile, futures traders cited by CME FedWatch saw a strong possibility of a Fed increase on Dec. 9.
Mortgage rates also respond to factors including oil prices, bond-market movements and national and global events, so their path remains uncertain. The average 30-year mortgage rate for October was 7.3%, up from 6.98% in September. If rates continue along that trajectory, a 7.5% monthly average this year is possible. The last time the monthly average reached that level was October 2023.
A further Fed increase would be intended to cool inflation. The source notes that bringing inflation under control could create conditions for lower rates later and ease pressure on household budgets, including those of prospective homebuyers.
Sources: NerdWallet.