Market economists framed the decision as a longer holding pattern rather than a turning point
The Federal Reserve’s decision to hold its benchmark rate in a 3.5%–3.75% range at its January meeting keep borrowing costs elevated. The move matched Wall Street expectations and came as the central bank continues to wrestle with inflation that remains above its 2% goal and a cooling but still resilient labor market.
MBA senior vice president and chief economist Mike Fratantoni said the outcome aligned with his group’s base case, even as two policymakers pushed for another 25‑basis‑point cut.
“As the market anticipated, the FOMC left the federal funds target range unchanged at its January meeting,” he said.
“While not a unanimous vote, there does seem to be a clear and consistent majority in favor of a pause in this rate-cutting cycle, a pause that likely continues unless or until the job market weakens further.”
Mortgage outlook remains range-bound
Fratantoni said MBA’s rate view has not shifted. “MBA’s forecast has been for mortgage rates to remain in a relatively narrow trading range for the foreseeable future, likely remaining between 6 and 6.5% for 30-year conforming loans,” he said.
“The news from this meeting does not change our forecast for mortgage rates. We expect that this level of rates will help support a somewhat stronger spring housing market than last year, but not a breakout year.”
Other market economists also framed the decision as a longer holding pattern rather than a turning point.
“The Fed is likely on an extended pause with strong activity data and signs of stabilization in the labor market suggesting little need to take out further insurance,” said Kay Haigh, global co‑head of fixed income and liquidity solutions at Goldman Sachs Asset Management.
Former Cleveland Fed president Loretta Mester took a similar line, mentioning stubborn price pressures and a job market that has cooled from its post‑pandemic peak but has not cracked.
“The Fed is in a very good position to hold for a while and see how the economy actually evolves,” she said. “They need to keep policy a bit restrictive to help inflation move back down to 2%. It’s a good time to wait.”
Higher‑for‑longer and housing affordability
For housing professionals, the implications run beyond headline Fed moves.
Bankrate’s latest outlook suggested 30‑year mortgage rates could fluctuate between about 5.7% and 6.5% in 2026.
Forecasts for further Fed cuts, including expectations of between one and three moves next year, are similarly contingent on incoming data and market sentiment.
Advisers also warned borrowers and investors against building plans around an imminent rate slide.
“Americans who are hoping for lower borrowing costs should reset their outlook to a world of largely stable interest rates,” said Stephen Kates, a financial analyst at Bankrate.
“Making financial decisions based on the assumption of imminent change is likely to lead to frustration.”
Even if long‑term yields eased, industry sources cautioned that structural supply constraints would continue to underpin home prices.
“Even if mortgage rates come down a bit, it doesn’t mean the overall price of the house is going to go down,” said Ross Bramwell, managing director at HB Wealth.
“Until you have a larger supply of homes, it’s unlikely home prices come down anytime soon.”
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