Mortgage rates got a bit of a breather this past week, dipping down gently like a toddler settling into a nap after a sugar crash. The biggest drop? That came right after the Fed’s big midweek meeting. And no, they didn’t cut rates—nor did anyone with a functioning calendar and basic understanding of Fed behavior expect them to.
So… why did rates still move lower?
First, let’s clear up a common misconception: the Fed doesn’t set mortgage rates. Shocking, right? The only rate they directly control is the Fed Funds Rate (which sounds way more exciting than it actually is). Mortgage rates, meanwhile, are the drama queens of the financial world—constantly reacting to market gossip, speculation, and any whispers from Jerome Powell’s direction.
The Fed only gets together eight times a year to talk about rate stuff. Meanwhile, the bond market is like that overly chatty friend group that never stops texting—constantly changing its mind, reacting to every new piece of info.
Now, even when the Fed doesn’t change rates (which they didn’t this week), they still drop enough hints to keep Wall Street reading between the lines. That’s because:
- They talk about what might happen in the future.
- Their words can nudge bond traders into making moves, which in turn influences mortgage rates.
This time, the Fed did both of those things—cue the mortgage market giving a soft sigh of relief.
Every other Fed meeting, each Fed official gets to play a round of “predict the future” by submitting where they think the Fed Funds Rate should be over the next few years. These are called “projections,” though most of us read them like horoscopes—fun to interpret, mildly terrifying if you take them too seriously.
This week’s projections were actually less scary than expected. The markets were bracing for a more hawkish (read: interest rate grinch) Fed, but instead we got a slightly more balanced response. The average Fed member’s expectations ticked up a little, but the median (a.k.a. the one everyone actually pays attention to) stayed the same.
Check out this fancy dot plot below to visualize the projections. Each dot is a Fed member’s opinion—red dots are from December, blue dots are this week. You’ll see some of the 2025 blue dots creeping up a bit, and then drifting back down again in 2027 like they forgot what they were talking about.
In other news, the Fed also tweaked the way it handles its bond portfolio. Without boring you to tears: they’re now going to replace maturing Treasuries a bit more enthusiastically. It’s like restocking your snack drawer instead of letting it go empty. Chair Powell insists this change is “technical,” not “tactical”—but markets didn’t care. They did their thing and nudged rates a bit lower anyway.
If this week’s rate dip had been all about the Fed’s new projections, we’d have seen a bigger drop in Fed Funds Futures (those are contracts for financial nerds who like to bet on interest rate moves). But as you can see below, the futures barely budged after the meeting. So the Fed didn’t exactly blow the doors off expectations.
Now, for mortgage rates, the mild positive reaction was exactly what the doctor ordered. You don’t want a sudden, sharp rally—it’s like trying to sprint after eating a burrito. It usually ends in pain and regret. Instead, we’re seeing lenders offer some of the best rates since October, and the market’s cautiously optimistic.
If we’re going to see even lower rates ahead, we’ll need backup from upcoming economic data. The two headliners?
- Next Friday’s PCE Price Index (that’s a key inflation measure)
- The Jobs Report the Friday after that
Other reports can still sway the market—especially if they veer far off from forecasts or start singing the same song—but those two are the Beyoncé and Taylor Swift of economic releases right now.
So stay tuned, keep your seatbelt fastened, and maybe hold off on locking that rate for just a bit longer—unless you’re the kind of person who orders the same thing every time at a restaurant. In that case, do your thing.