“The dissenters had previewed their arguments in recent speeches,” he said. “Their concerns are that the Fed would be better to cut rates now, before weakness in the job market becomes more apparent.”
Fratantoni also noted that while recent tariff increases could lead to a pickup in inflation, both dissenters appear to believe the effect will be temporary.
MBA expects three rate cuts through 2026
Despite the Fed’s current pause, the MBA maintains that interest rate reductions are still likely. “MBA’s forecast is that conditions will evolve such that the Fed will cut rates twice this year and once more in 2026,” Fratantoni said. He cited labor market softening as the primary factor likely to push the FOMC to ease policy.
Limited relief for mortgage borrowers
However, Fratantoni cautioned that any action on short-term rates may have minimal effect on mortgage markets. “The Fed’s actions with respect to short-term rates are likely to have little impact on longer-term rates,” he said. The MBA projects 30-year mortgage rates may decline only slightly to 6.5% in the next year, constrained by rising federal deficits and Treasury issuance.
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