US Interest Rates 9-19-25

Will the Fed cut rates in September? 

Yes, the Fed is widely expected to cut interest rates at its upcoming September 16-17 meeting, with most economists and analysts predicting a 25-basis-point reduction. This anticipated move is supported by signs of a slowing job market and cooling inflation, though a modest August increase in the Consumer Price Index may complicate the decision. The market is likely to price in a small rate cut, but the actual impact on mortgage rates is debatable and could be minimal, according to The Mortgage Reports. 

Why a Rate Cut Is Expected

Slowing Labor Market: Four months of evidence suggests a persistent slowdown in labor demand, giving the Fed a reason to ease policy to support the job market, says Michael Gapen, chief U.S. economist at Morgan Stanley. 

Inflation Cooling: While inflation ticked up slightly in August, the overall trend is still toward cooling, which provides the Fed room to cut rates, according to USA Today. 

Market Expectations: A large majority of economists in a Reuters poll predicted a rate cut, and market pricing reflects a near-certainty of a quarter-point reduction. 

What to Expect from the Meeting

Marginal Cut: The expected cut is a modest 25 basis points, which is less than last year's larger cut and may have minimal immediate impact on mortgage rates, notes CBS News. 

“Hawkish” Cut:  The cut is likely to be considered a "hawkish cut," as the Fed may reiterate that the fight against inflation is not over, according to Yahoo Finance. 

Mortgage Rate Uncertainty: While the short-term federal funds rate is set by the Fed, mortgage rates are influenced by longer-term Treasury yields, making them less predictable and not guaranteed to fall with the Fed's action, according to The Detroit Free Press. 

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Will mortgage rates go down if the Fed cuts rates?

No, a Federal Reserve rate cut does not directly cause mortgage rates to fall; instead, mortgage rates are more influenced by the 10-year Treasury yield and broader economic factors like inflation and bond market conditions. While a Fed rate cut lowers short-term borrowing costs, longer-term loan rates, such as 30-year fixed mortgages, often follow market trends that can diverge from the Fed's actions, sometimes even rising after a rate cut if the bond market anticipates future economic risks or a pickup in inflation. 

Why the Fed's Rate is Not the Main Driver for Mortgages

Short-Term vs. Long-Term Rates: The federal funds rate primarily impacts short-term rates, which affect things like credit card and personal loan costs, not long-term investments like mortgages. 

Bond Market Influence: Mortgage rates are more closely tied to the 10-year Treasury yield, which is influenced by the overall bond market, investor expectations, and inflation outlook. 

Investor Sentiment: If the bond market perceives a Fed rate cut as a sign of broader economic weakness, it can lead to higher demand for bonds, pushing Treasury yields down and potentially lowering mortgage rates. Conversely, if the cut is seen as a response to potential future inflation, bond yields could increase, causing mortgage rates to rise. 

What to Expect with a Fed Rate Cut

Anticipation: Mortgage rates may adjust before the Fed actually cuts them, as markets try to price in future rate changes. 

Divergence: Mortgage rates can sometimes move independently of Fed rate cuts, even moving in the opposite direction, as seen when mortgage rates rose after previous Fed rate cuts at the end of 2024. 

Broader Economic Factors: Changes in inflation, economic growth, the labor market, and geopolitical events are all crucial factors that impact mortgage rates, sometimes more than the Fed's policy moves. 

Comments

If Lenders fear Layoffs, they will bake the risk into a higher rate. If the Buyer has a relative who will co-sign the loan and guarantee payments, the rate can be lowered. The 2008 Mortgage Meltdown was caused by approving loans for unqualified buyers. Those with higher Credit Scores are better positioned to get lower loan rates.

On 9-17-25, the Fed cut their Interest Rate by 0.25%.

Norb Leahy, Dunwoody GA Tea Party Leader