Today wraps up the 2-day FOMC meeting which ends with a highly anticipated announcement from the Fed on decisions the Fed Funds rate. It’s important to note that this decision does not directly change mortgage rates. For example, if you hear that the Fed has cut rates by a quarter point or 25 basis points, this does not mean that rates for the 30-year fixed are now a quarter point lower.  The action the Fed takes and their commentary or information they release during this meeting does influence the direction of mortgage rates.

This is because mortgage rates are based on bonds, mortgage-backed securities, which react negatively to inflation. The Feds decisions with the Funds Rate is based on getting and keeping inflation in line.

It is widely expected that the Fed will reduce the Funds Rate by 25 basis points today (around 11:00 am PST).

As I’m writing this post, around 9:30 am on December 18, 2024, UMBS 30YR 6% is up 5 basis points (kind of flat). I share this with you so we can see how this changes following the Fed announcement and throughout the day.

Stay tuned!

11:16 am. Fed Chair Powell announced the 25 basis points cut to the Fed Funds rate and MBS has deteriorated by 22 basis points. In other words, mortgage rates are trending higher.

12: 30 pm: The Fed dot plot chart revealed that the Fed is now forecasting 50 basis points in rate cuts instead of the 100 basis points in cuts for 2025. Bonds are not liking this and have continued to deteriorate. MBS is now down 39 basis points.

12: 44 pm: MBS down 49 basis points. Dow is down 1,106 and Nasdaq is down 756.

I have received “alerts to lock” from the services that I subscribe to for watching the bond market/track interest rates.

The next Fed decision is scheduled for January 29, 2025.