Brokers hopeful for post-Powell era in 2026 and potential of more aggressive cuts
While the Federal Reserve’s Wednesday decision to cut its federal funds rate by 25 basis points seemed to be relatively unified, the central bank chair revealed that discussions about December have been much more divided.
Jerome Powell addressed the media following Wednesday’s rate decision. And while he noted that rate decisions are always taken one meeting at a time, his mention that a December cut was “not a foregone conclusion” suggested the Federal Open Market Committee (FOMC) had “strongly differing views” about the final meeting of the year.
“In the committee's discussions at this meeting, there were strongly differing views about how to proceed in December,” Powell said. “A further reduction in the policy rate at the December meeting is not a foregone conclusion, far from it. Policy is not on a preset course. And at a time when we have tension between our two goals, we have strong views across the committee.
“There were strongly different views today. And the takeaway from that is that we haven't made a decision about December, and you know, we're going to be looking at the data that we have, how that affects the outlook and the balance of risks.”
Powell said mentioning the dissent about the upcoming December meeting was notable.
“As you can see from the SEP and from the public discussion that goes on between the meetings, when participants go out and talk, they have very disparate views,” Powell said. “They were reflected in strongly different views in today's meeting, as I pointed out in my remarks. I always say that it's a fact that we don't make decisions in advance, but this is saying something in addition here: It's not to be seen as a foregone conclusion. In fact, far from it.”
In the aftermath of Wednesday's rate cut, the 10-year Treasury yield rose nearly nine bps to 4.07%. This could lead to a short-term bump in mortgage rates.
End of quantitative tightening
The other big news out of the Federal Reserve, besides Wednesday’s cut and December’s disagreements, is the decision to end quantitative tightening on December 1. The Fed plans to take maturing mortgage-backed securities (MBS) and purchase treasuries. This could lower Treasury prices, which could lower mortgage rates.
“We will continue to allow agency securities to run off our balance sheet, and will reinvest the proceeds from those securities in Treasury bills, furthering progress toward a portfolio consisting primarily of Treasury securities,” Powell said. “This reinvestment strategy will also help move the weighted average maturity of our portfolio closer to that of the outstanding stock of Treasury securities, thus furthering the normalization of the composition of our balance sheet.”
Powell also mentioned something that Barry Habib hinted at during recent speeches at the NAMB National and AIME Fuse events. He said inflation numbers might not be as bad as they look, because if you remove tariffs from the inflation number, it is much closer to the 2% goal the Fed has set.
“Inflation away from tariffs is actually not so far from what that is,” he said. “It might be five or six tenths. So if (overall inflation) is 2.8, then core PCE, not including tariffs, might be 2.3 or 2.4 in that range. So that's not so far from your goal. And the thing about tariff inflation is that the base case is that it will come, and it probably will increase further, but it will be a one-time increase.”
A more aggressive Fed
While the continued cuts, combined with the end of quantitative tightening, may provide some relief in mortgage rates, some brokers think the significant relief is still months away.
In May 2026, Jerome Powell’s term as Fed chair comes to an end, unless he is renewed, which seems unlikely. The Trump administration is already lining up potential successors to Powell.
Derek McGowan (pictured top left), branch manager at McGowan Mortgages, is one of the top loan officers in the nation. He told Mortgage Professional America that he believes more rate relief could be on the way after Powell is replaced.
“My big thing that I’ve been circling on the calendar is in May, when Jerome Powell very well might be out,” McGowan said. “The current administration has very opposing views of how the Fed is being run. With rate cuts, they want that much more aggressive. I’m optimistic that, even though Fed rates are not mortgage rates, come May, we could see some good relief from that.
“If whoever they put in is on board, I think there could be some good relief in there. That means people who are buying houses should get prepared in advance, because if that does happen, things move really quickly.”
The Federal Reserve announced another 25-basis-point cut to the federal funds rate on Wednesday, as a softening jobs market continues to concern the central bank.https://t.co/QnkimPfwm5
— Mortgage Professional America Magazine (@MPAMagazineUS) October 29, 2025
Tom Davis (pictured top right), chief sales officer of Deephaven Mortgage, is also optimistic that there could be further rate cuts over the next couple of years.
“You look at the Fed’s meeting notes going all the way out to 2027, and there are potential additional other cuts,” Davis told Mortgage Professional America. “So you could see the Fed cut rates over the next two years by 75 to 150 basis points. I don’t know how much that really moves mortgage rates, but there’s a possibility rates could come down below six.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
