A month ago, it was widely accepted that the Federal Open Market Committee (FOMC) would cut interest rates by 25 basis points in October and November (there is no November meeting).
As expected, the FOMC did indeed cut interest rates in October, but the chance of an additional rate cut in December has become much less certain.
In his comments following the October meeting, Fed Chairman Jerome Powell said a December cut isn’t a foregone conclusion. “Policy is not on a pre-set course.”
An Uncertain Path Ahead
Powell isn’t the only one not certain of a cut next month. Fed officials are “all over the place” in their communications, Andrew Brenner, Vice Chairman at NatAlliance Securities, wrote to clients. He still thinks the Fed will cut rates at its next meeting on Dec. 9 and 10, though he noted persistent uncertainty from a federal government shutdown that’s now in its 38th day. “There is a lot of wood to chop over the next five weeks, with or without government data,” Brenner said, adding that the message from the Fed has been “confusing.”
“It is important to keep in mind that part of Mr. Powell’s job is to temper the market’s reaction to whatever decision is made in December,” said Sarah DeFlorio, William Raveis Mortgage VP of Mortgage Banking. “By the time the Fed announces the direction they have chosen, predictions are already baked into what is happening in the bond and rate markets. While he certainly did not explicitly say that there will not be a rate cut, I see this language almost as an insurance policy against markets overreacting to an unexpected action.”
“There is a great deal of uncertainty regarding a rate cut following next month’s meeting. While there is a clear consensus that rates will fall, it isn’t as conclusive as it was prior to the most recent Fed meeting,” noted Robert R. Johnson, Professor of Finance, Heider College of Business, Creighton University. “There are several reasons for the mixed outlook, chief among which is the lack of data on inflation due to the government shutdown. Inflation still remains problematic, but employment is increasingly a concern of the Fed. U.S. companies announced over 153,000 job cuts last month, driven by the technology and warehousing sectors, according to data from Challenger, Gray & Christmas Inc.
“Recent private data is showing cracks in consumer confidence and the potential for a much slower holiday sales period,” said Max Slyusarchuk, CEO of A&D Mortgage, LLC. “Even if rates get lowered at this point, it is unlikely to boost housing sales until early next year at the very least. Homebuyers continue to shop around for better mortgage deals, as they hold all the cards in this housing market. Therefore, it’s not surprising that many may hold out for rates to dip further. However, this strategy isn’t particularly effective as the mortgage market is pricing in rates above 6% for the foreseeable future, regardless of monetary policy.”
Michael Micheletti, Unlock Technologies’ Chief Marketing Officer, agrees: “Homeowners may feel it’s too risky to make major changes—such as selling and buying a house or taking on optional debt—when the economic environment is so uncertain. Prices continue to rise, the effects of tariffs are not yet fully known, and most homeowners don’t feel better off financially than they did a year ago.” “The increasing discord among Federal Reserve officials regarding the timing of interest rate cuts underscores the heavy reliance of today’s financial and tech ecosystems on transparent economic indicators,” said Sandeep Shivam, Product Leader for Tavant. For fintech platforms and technology-oriented lenders, such ambiguity adds complexity. AI models, pricing mechanisms, and risk evaluation tools rely on stable rate trends to maintain accuracy. When policy direction lacks clarity, particularly with incomplete official data, these systems become more unstable and require frequent adjustments. Thus, what might appear to be solely an economic issue directly affects digital mortgage platforms, credit decisioning systems, and the financial guidance provided to consumers.
The post Fed’s December Rate Cut Uncertain as Officials Send Mixed Signals first appeared on The MortgagePoint.
