The Federal Reserve is set to make an important interest rate decision on July 30, 2024. This comes after a year of economic growth acceleration and inflation cooling down. The Fed had raised interest rates to their highest point in 23 years last year, but now economists predict the first rate reduction since 2020 will occur at the September meeting. Here's what homeowners and buyers need to know about this development.
Economic growth has been solid but unspectacular, averaging 177,000 jobs added per month for the past three months. Inflation, one of the Fed's policy goals, has fallen from a peak of 9.1% in June 2022 to about 3% on an annual basis. Mortgage rates have also downshifted to just under 6.8%, after hitting 7.2% in May.
The Federal Reserve's decision will impact mortgage rates, which are partly influenced by the Fed's policy. Homeowners should consider refinancing if their prevailing rate is at least 50 basis points above the current rate. For homebuyers, this could mean lower monthly payments and a more affordable housing market.
The Federal Reserve's meeting on July 30-31 will be closely watched by investors, as it may signal the start of a broader trend in interest rates. The first rate cut since 2020 is expected to occur at the September meeting, but traders have already started rotating out of Big Technology shares and into other sectors due to signs of cooling inflation.
Traders have poured nearly $6 billion into non-tech sector US exchange-traded funds since the July CPI print, while just $1.4 billion has flowed into tech ETFs during the same period. This trend could continue if the Fed signals that rate cuts are coming soon.
