All eyes are on the September 16, 2025 Fed meeting. Markets are leaning toward a 25 bp cut as hiring cools 142,000 August nonfarm payrolls and 4.2% unemployment point to softer momentum while core inflation at ~3.2% keeps the Fed’s job complicated. The decision is a balancing act: ease policy into a slowing economy without reigniting prices.
Street consensus: Big banks (JPMorgan, Deutsche Bank, Morgan Stanley) expect a cut. Revisions also show the labor engine was weaker than advertised ~911,000 fewer jobs between April 2024 and March 2025 than first reported. On the policy front, tariff headlines earlier this year likely added some price pressure and uncertainty for employers; officials have floated another 90-day tariff pause, which—if extended—would be the third in a row and mildly disinflationary at the margin.
Risk assets have already voted: Bitcoin (~+450%) and gold (~+105%) are classic “easier policy / softer dollar” trades. Meanwhile, equity ownership remains concentrated: by mid-2022, the top 10% held ~93% of equities and mutual funds—rate-sensitive rallies can widen that gap.
History lesson (with caveats): Since 1980, in 20/20 instances where the Fed cut while the S&P 500 sat at or near record highs, the index finished higher 12 months later, averaging ~13.9% gains. Short term is noisier: in the first month, stocks fell in roughly half the cases (11/22). Translation: expect near-term chop, but historically the 12-month tape has leaned bullish after “cuts at highs.” Past ≠ future; correlation isn’t causation.
Jackson Hole context: Chair Powell warned that tariff-driven price bumps could embed a “more persistent” inflation dynamic. The Fed may look through one-off bursts if longer-run inflation expectations stay anchored—but they won’t ignore a trend.
Market-Moving Calendar (Mortgage-Rate Implications)
Retail Sales (Tue): Strong spending = hotter growth → yields up / mortgage rates up. Weak = yields down / rates down.
Fed Rate Decision (Wed): A cut usually pulls yields lower; the dot-plot and guidance matter as much as the move.
Press Conference (Wed):
“Hawkish” (focused on inflation control) can blunt a rally in bonds.
“Dovish” (tilted to growth/employment support) usually helps bonds, rates fall.
Dot-Plot (Wed): Easier path (fewer hikes/more cuts) → bonds bid / rates ease.
Philly Fed (Thu) & Jobless Claims (Thu): Weaker manufacturing or rising claims support lower yields; strength does the opposite.
Bottom line for mortgages: Cuts tend to make bonds more valuable and push rates lower, but the size of the move will come from the Fed’s tone and the incoming data.
Recession Risk: The Uncomfortable Middle
Moody’s Analytics pegs the 12-month recession probability near 48% not a coin-flip, but elevated by historical standards. Signals to watch:
Yield curve: A 2s/10s inversion has preceded most post-war recessions.
Manufacturing/PMIs: Prolonged contraction = cooling growth.
Consumers: Softer confidence and retail sales weigh on GDP.
Corporate health: Downshifts in earnings and capex foreshadow slower hiring.
Global demand & trade: Geopolitics and weaker external demand can bite exports.
Policy timing is tricky. Cut too early, risk re-accelerating inflation. Cut too late, risk a deeper slowdown. Remember the lag: monetary policy takes 12–18 months to fully work through the economy. A “soft landing” is the goal; if a downturn arrives, mortgage rates typically fall further as bonds rally.
Homebuyers on the Sidelines (National Snapshot)
Rates have backed off to roughly 6.28% on average, enough to add $20K+ in purchasing power versus mid-summer—but affordability is still tight. The median payment ~ $2,604, and the median sale price ~ $393,000 (up ~1.7% YoY). Supply is inching higher but remains constrained: new listings ~ +1.3% YoY, and active inventory is growing slowly.
Demand is cautious: pending sales ~ +1.1%, mortgage applications +7% last week, ~45 days on market, ~24.6% of homes selling over list (down from ~28%), and ~4.4 months of supply, a “balanced-ish” picture with pockets of buyer leverage. Many buyers are waiting for even lower rates; many economists don’t see dramatic additional declines near term. If you can secure terms you like today, locking may beat waiting.
What This Means for You (No Sugar-Coating)
For investors and equity holders: History likes cuts at highs over 12 months but expect volatility first.
For mortgage shoppers: The Fed’s tone + upcoming data will steer the next leg. Have your file fully underwritten so you can lock quickly on dips.
For buyers: Use this quieter tape to negotiate repairs/credits. Know your walk-away number; rate-drops tend to pull more competition back in.
For sellers: Real buyers are still out there. Price to today’s comps, not last spring’s wish list; clarity converts showings to offers.
If you want, I can translate this macro picture into a neighborhood-level plan payments at different rates, sensitivity to price changes, and a negotiation script tailored to your goals. Just send us an email or shoot us a message!