Interest rates are a two-edged sword.
Higher rates help savers, while lower rates help borrowers with payments on everything from credit cards to student loans to mortgages.
The Federal Reserve has hiked interest rates 11 times since March 2022 in an effort to curb inflation.
Many experts expect the Fed to signal a rate reduction is coming in September. That could have a big impact on things like housing affordability, as it would help ease mortgage rates, Jacob Channel, senior economist at LendingTree, told Fox Business.
Financial analyst Meredith Whitney said the Fed would need to “lower rates dramatically” — in the neighborhood of 75 to 100 basis points — to bring mortgage rates down.
“We’re not going to get there with 50 basis points,” Whitney told Fox Business. “[It’s] way more than [a full percentage point] to get the housing market moving.”
“Just paying principal and interest has more than doubled, and the qualifying income for first-time homeowners has gone up dramatically,” Whitney said. “So today, it stands [at] over $90,000, and that’s 61% higher than the median income. You can see why first-time buying is out of reach.”
The Wall Street Journal reports on what to watch for in the Fed’s announcement today. Here’s the start of the story:
The big question going into the Federal Reserve’s meeting Wednesday comes down to how strongly officials signal their desire to cut rates.
The central bank is widely expected to hold its benchmark short-term interest rate steady—in a range between 5.25% and 5.5%, a two-decade high—while setting the table to begin a series of reductions at the next meeting in mid-September.
The Fed releases its policy statement at 2 p.m. Eastern time on Wednesday. Fed Chair Jerome Powell speaks at a news conference at 2:30 p.m. Here’s a look at the four most important questions ahead of the decision:
Where do officials set the bar for a September interest-rate cut?
Officials are expected to revise their postmeeting statement in ways that hint that a rate cut in September is more likely than not. The policy statement is heavily debated by the 12 voting members of the Fed’s rate-setting committee.