The Federal Reserve has released the minutes of its January meeting, when the Federal Open Market Committee (FOMC) voted to keep the the federal funds rate at 1.5 to 1.75%, according to a statement following the latest Committee meeting. The Committee cited a strong labor market and moderately rising economic activity.
“Markets anticipated the Fed’s stance in the wake of the bank’s December meeting. As investors anticipate rising risks in markets, demand for bonds is likely to remain solid, keeping mortgage rates on a sideways trajectory in the months ahead,” said realtor.com's Senior Economist George Ratiu. “Rates are about 80 basis points below last year, offering first-time buyers favorable home financing. However, the number of homes available for sale have reached a two-year low, adding headwinds to the housing market.”
While interest rates are low, following multiple decreases from the Fed in 2019, some homeowners and potential buyers would still like to see them fall further. Of the three most popular government actions among first-time homebuyers—lowering interest rates, providing tax credits, and easing lending standards—lower interest rates are the most popular option, Redfin reports, especially among buyers with annual incomes of less than $100,000. However, as Redfin notes, though these government actions would make homebuying more affordable in the short-term, they would not directly address the long-term shortage of affordable homes.
The FOMC will be looking at global economic indicators when determining its next rate decision. During the first part of Federal Reserve Chair Jerome Powell’s Monetary Policy Report, Powell reported that the U.S. economy is currently in a “very good place,” citing the 11th consecutive year of economic expansion, as well as a moderate increase in activity and a strengthened labor market.
On Monetary Policy, Powell noted that the FOMC believes that the current stance of monetary policy will support continued economic growth, a strong labor market, and inflation returning to the Committee's symmetric 2% objective.