Fed skips an interest rate hike, but high mortgage rates could be here to stay
Former Federal Reserve Governor Robert Heller provides insight on the Federal Reserve's moves on 'Kudlow.'
The Federal Reserve skipped an interest rate hike at the conclusion of its two-day meeting on Wednesday, but the much-anticipated pause may offer little relief to Americans squeezed by higher borrowing costs.
The widely expected decision left interest rates unchanged at a range of 5.25% to 5.5%, the highest level since 2007.
But policymakers also opened the door to one more rate increase this year, meaning there could be more pain for would-be homebuyers in the form of steeper mortgage rates. Economists also believe that Fed officials will reiterate a previous message that they have no intention of cutting rates anytime soon — meaning that high rates may be here to stay.
HOUSING STARTS UNEXPECTEDLY PLUMMET TO LOWEST LEVEL SINCE 2020
A pedestrian passes the Federal Reserve building in Washington, D.C., on June 3, 2023. (Nathan Howard/Bloomberg / Getty Images)
«Higher rates are a positive for savers, but it also means mortgage rates may not fall all the way back to where they were in 2020 and 2021,» said Sonu Varghese, global macro strategist at Carson Group.
Mortgage rates spiked over the past year as the Fed waged an aggressive campaign to crush high inflation. In the span of just 16 months, the central bank approved 11 rate increases — the fastest pace of tightening since the 1980s.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
While the federal funds rate is not what consumers pay directly, it affects borrowing costs for home equity lines of credit, auto loans and credit cards.
Rates on the popular 30-year fixed mortgage are currently hovering around 7.18%, according to Freddie Mac, well
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