This is a great time to revisit your mortgage strategy

What to Expect at the Federal Reserve's December Meeting (2024)

The Federal Reserve's Federal Open Market Committee (FOMC) is set to hold its final meeting of the year on December 17–18, 2024. This meeting will be closely watched, as it may provide critical insights into the Fed's direction on interest rates, economic growth, and inflation.

Key Expectations

1. Rate Cut Likely
   Following its recent 25 basis-point (bp) rate cut in November, the Fed is widely expected to announce another 25 bp reduction at the December meeting. This would bring the federal funds rate closer to a range of 4.25%–4.50%. The Fed's primary goal remains promoting price stability and maximum employment, particularly as inflation shows signs of moderation.
2. Economic Projections Update
   This meeting will also feature the release of the Fed’s updated Summary of Economic Projections, which includes forecasts for GDP growth, unemployment, and inflation. Many analysts anticipate a revision toward slower GDP growth in 2025, reflecting the Fed’s ongoing efforts to balance inflation control with economic stability.
3. Focus on Consumer Spending and Labor Market
   With the recent jobs report revealing steady hiring but a slight increase in unemployment, the Fed will likely evaluate how these dynamics impact its dual mandate of employment and inflation stability. Consumer spending trends will also play a significant role in shaping future rate decisions.
4. Long-Term Guidance
   Beyond December, analysts expect a more gradual approach to rate cuts, possibly at a quarterly pace in 2025, as the Fed seeks to maintain flexibility in responding to any unexpected changes in the economic outlook.

What This Means for Borrowers and Homebuyers

If the Fed proceeds with a rate cut, borrowing costs for mortgages, auto loans, and other credit products could decrease slightly. However, lenders may not immediately pass on these savings to consumers. Mortgage rates, for instance, are also influenced by factors such as Treasury yields and market sentiment, which may take longer to react to Fed decisions.

LQ Take

The December meeting is pivotal for understanding the Fed's strategy heading into 2025. With that said keep in mind as rates drop, demand for properties increases which in turn means more competition in the marketplace. The real question is what type of marketplace would you prefer to enter? There may be better opportunities in the marketplace now, particularly with many sellers willing to give concessions. That’s why we don’t talk rate, we talk strategy.