What one industry veteran believes will drive mortgage rates through the end of the year
The markets got exactly what they expected on Wednesday when the Federal Reserve announced a second straight 25-basis-point cut in the fed funds rate.
However, what followed in Jerome Powell’s comments to the media seemed to be a direct message to the markets: stop guessing along with the Fed.
Melissa Cohn (pictured top), regional vice president of William Raveis Mortgage, said that doesn’t necessarily mean mortgage rates are going back up or even holding steady. She said that even if the Fed holds in December, other factors like a continuing shutdown or further weakness in the job market may push rates lower anyway.
“I would say that if the news continues to show that the employment sector remains weak, and that if we see that tariff pressures are eased, like what's going on with China, I think the mortgage rates will settle back down,” Cohn told Mortgage Professional America. “The markets always tend to be very reactionary. And I think without any concrete data to support a move one way or the other, that the moves can be exaggerated.”
She said the reaction was seen in the 10-year Treasury, which is often most closely associated with mortgage rates. For the second straight Fed meeting, the 10-year jumped after the rate cut announcement. She believes there was no reason for that and that it was an overreaction of the market.
“It's sort of like trading in the stock market the day after a holiday or a half day, where it's all the junior traders that are in there, and market moves can be exaggerated because of lighter volume,” Cohn said. “Hopefully, the government will find a way to reopen at some point in the near future. Other than the remarks and disappointing the markets, there was no data that supported bond yields surging 10 basis points.
“It is all on Powell's comments, and then another Fed member could come out and speak next week and say something very different, and the markets could turn around again. That's all the markets have to trade on right now.”
Powell’s hawkish comments
Cohn said the rate cut announced Wednesday was expected, but a larger cut really wasn’t in play due to the lack of data the central bank had at its disposal.
“I think we all knew and expected that the Fed was going to cut by a quarter,” she said. “I think anyone who was making calls for a bigger rate cut had their thoughts misplaced. It's hard enough for the Fed to make a decision, especially in light of the fact that there's virtually no data that they had to analyze. That was almost a bolder move for them to actually make a rate cut with limited data.
But what followed the rate announcement got everyone’s attention. Jerome Powell not only said that a December cut was not a foregone conclusion, but made sure to note that the fact he was calling that point out was important.
“The markets, until Powell spoke, actually expected that there would be a cut in December, as a foregone conclusion,” Cohn said. “And Powell made it clear that was not the case, and it was most interesting because he addressed that fact in his remarks, as opposed to waiting to be questioned. He was sending a clearly hawkish message to a market that was waiting for the doves to come flying out of the cage.”
December cut still possible
The reason Cohn believes Powell was so direct about it was the perception that markets were driving Fed decisions, not the other way around.
“I think that Powell has always been very careful not to let the markets drive the Fed,” she said. “This is not the first time that the Fed has had a rate cut, yet his comments in the press conference have caused bond yields to go up because he's not willing to let anyone know what their next move is. He's trying to put the markets back in their place and not let them speculate too far.”
The Fed cut rates 25 basis points but Powell noted strong dissent on December’s move. With quantitative tightening ending and possible leadership changes in 2026 Derek McGowan and Tom Davis anticipate further cuts could bring mortgage rates lower.https://t.co/1r9j9xs3v0
— Mortgage Professional America Magazine (@MPAMagazineUS) October 30, 2025
CME FedWatch, which uses the 30-day fed funds futures prices to project future central bank rate movements, has backed off on the overwhelming odds of a December cut. On Friday afternoon, it placed the odds of a cut on December 10 at 63%. While that’s still decent odds of a rate cut, one week ago, the percentage chance of a cut was 96.4%, with a nearly 5% chance of a 50-bps cut.
However, despite the stop sign from Powell, Cohn believes that there are circumstances that could play out over the next six weeks that might not give the central bank a choice but to continue easing.
“I think a lot of it will have to do with what the impact will be on our economy if we have a shutdown for another month,” she said. “Will they stop paying the SNAP benefits? If there becomes an approved crisis, they may be forced to cut because they have to.”
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