The Federal Reserve lowered interest rates by a quarter of a percentage point this week, its second cut since late July, and suggested it was prepared to move aggressively if the United States economy showed additional signs of weakening. For now, a growing number of Fed officials expect one more cut this year, based on economic projections released after the Fed’s two-day meeting. But an unclear economic outlook and a division within the Fed’s policy-setting committee prevented a clear message about what comes next.
The Fed’s policy interest rate is now set in a range of 1.75% to 2%, and not a single official sees it falling lower than 1.5% to 1.75% through the end of 2022. Stocks initially fell on the Fed’s announcement on Wednesday. But they ended slightly higher on the day, and Treasury yields barely moved, suggesting that the Fed’s decision and communication were roughly in line with investor expectations.
In this period of historically low mortgage rates, numbers out this week settled just above 3.20% for a 15-year fixed loan, and just below 3.75% for a 30-year fixed.