The Fed holds key interest rate steady at this time

On Wednesday, March 18, the Federal Reserve concluded its second of eight scheduled meetings in 2026. As expected, the Federal Open Market Committee, the policy-setting body within the Fed, held interest rates steady at this time.

The Fed's conservative wait-and-see approach to adjusting rates is not a surprise, as FedWatch predicted it was 99% likely that rates would remain unchanged after the March meeting. This marks the second meeting in a row that the Fed has declined to reduce rates, keeping the federal funds rate in its current range of 3.50% to 3.75%.

While many experts believe future rate cuts are coming, some have made recent adjustments to their estimates of when, with forecasts for a rate cut shifting from summer to October. The change is driven, in part, by uncertainty about events both at home and abroad, which justify the Fed taking a more conservative approach in the coming months.

Why the Federal Reserve held rates steady in March

The Federal Reserve has a dual mandate when establishing monetary policy, with the Fed focused both on maintaining a robust labor market and keeping inflation as close as possible to its target rate of 2%.

The labor market is showing potential signs of cooling, with the February 2026 jobs report indicating there were 7.6 million unemployed workers and a 4.4% unemployment rate. And, despite expectations that the economy would add 59,000 jobs, payroll employment was down 92,000 jobs.

Still, the unemployment rate still remains near historic lows, and hiring has slowed but is not collapsing, so labor market concerns don't justify a rate drop -- especially in light of other factors.

Specifically, inflation remains stubbornly above the target rate, with Bureau of Labor Statistics data released on March 11, 2026, showing a 0.3% increase on a seasonally adjusted basis in February and a 2.4% year-over-year increase with no seasonal adjustment.

The conflict in Iran and the resulting increase in oil prices could also put upward pressure on prices and worsen inflation, at least in the short-term, as Federal Reserve Chairman Jerome Powell noted after the meeting, stating that "near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East."

Since this is a potential concern, the Fed will likely want to monitor the conflict to see how long it is likely to last and how much it affects costs before cutting rates, as the Committee's post-meeting statement made clear by acknowledging that “the implications of developments in the Middle East for the U.S. economy are uncertain.”

How will the Federal Reserve's decision impact mortgage rates?

The Federal Reserve's decision to hold rates steady is likely to have a negligible impact on mortgage rates, as the Fed does not control mortgage financing costs directly.

While the Fed's actions can indirectly affect rate trends by impacting how much banks pay to borrow from each other, the Fed's current decision to leave rates unchanged was widely predicted, so markets already priced it in.

The conflict in Iran is also more likely to impact rates than the Fed decision, as geopolitical instability has pushed up 10-year treasury yields. Mortgage rates closely track Treasury bonds as these bonds compete for the same investors as mortgage-backed securities. In fact, rates already rose in March after the conflict broke out.

Still, mortgage rates do remain far below the elevated rates of the post-pandemic era, and those looking to buy a home can find affordable financing options -- especially if they are well-qualified buyers or are interested in pursuing VA or other government-backed loans.

Locking in at these current rates makes sense if you anticipate surging inflation, and you can always refinance if rates fall.

Freedom Mortgage can help you explore your mortgage loan options in today's current market, so give us a call to speak with a mortgage professional to understand your options and begin the prequalification process.

Federal Reserve Meeting Statement – January 2026

The Fed holds key interest rate steady

The Federal Reserve ended 2025 with a quarter-point rate cut -- the third cut of the year. With the rate reduction, 2025 ended with a benchmark rate of 3.50% to 3.75%, down from the 4.25% to 4.50% target rate in January 2024.

When the Fed announced the December rate cut, it also sent clear signals that it would be the last for a while, with the post-meeting statement cautioning that “the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks” in determining the "extent and timing of additional adjustments to the target range for the federal funds rate."

This signaling, coupled with recent economic reports, led to a widespread belief -- including among economists polled by Reuters -- that no additional cuts would be forthcoming in the first meeting of the new year on January 28, 2026.

That belief proved accurate as the Federal Reserve held rates steady today. Let's take a look at why the Fed didn't cut rates and what this decision could mean for the future.

Federal Reserve holds rates steady as economic data signals stability

The Federal Reserve has a dual mandate: To keep inflation rates low and the labor market strong. To fulfill this mandate, it makes decisions on interest rates by carefully watching economic data. Most of that data released in January pointed towards keeping rates stable because the economy is trending towards stability.

If unemployment rates were rising, the Fed might have felt more pressure to cut rates -- but the Bureau of Labor Statistics reported that the unemployment rate was 4.4% in December of 2025, little changed from the month before. The labor force participation rate (62.4%) and employment-population ratio (59.7%) also remained stable.

Payroll growth does show signs of a cooling trend, with payroll employment rising by 584,000 in 2025, which is well below the 2.0 million increase in 2024. This is a trend to watch, as a slowdown could potentially result in rate cuts later in the year.

However, it wasn't enough to justify a cut this month, especially given that inflation remains above the Fed's target rate of 2.0%.

There was some good news on inflation, as the Bureau of Labor Statistics reported the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.3% month-over-month in December on a seasonally adjusted basis and was up 2.7% year-over-year. This is well below the high levels of inflation that have been a hallmark of the post-pandemic era.

Still, the Fed is likely to want to see inflation continuing to trend downward in order to move forward with those rate cuts later in the year that some are hoping for.

Wages also rose 3.8% year-over-year based on December's BLS report, and while the Fed doesn't have a specific target for wage growth, this number is relevant to the inflation outlook and is further reason the Fed paused on another cut until more data comes in.

What does this mean for mortgage rates?

For would-be homebuyers still holding out hope for a dramatic drop in mortgage rates, the Fed holding rates steady probably isn't good news. On a positive note, though, this decision is unlikely to impact rates very much at all, for a few reasons.

The market already projected that there would be no rate cut, so the Fed news isn't likely to change mortgage rates now because it doesn't come as a surprise. More importantly, the federal funds rate does not directly impact mortgage rates, which tend to be driven more by inflation expectations and long-term bond yields, particularly the 10-year Treasury yield.

Most experts anticipate mortgage rates will remain around the 6% range for much of this year, although cooling inflation and a softening economy could result in a bigger drop, while geopolitical shocks could send rates moving in the opposite direction.

Absent clear signs of a troubled economy or major unexpected political event, though, big moves in either direction for mortgage rates are unlikely for the time being. They're also unlikely for the Fed funds rate as well, as JP Morgan projects that "the Fed is expected to remain on hold through 2026, keeping the funds rate steady at 3.5–3.75%."

Steady rates aren't what homebuyers have been dreaming of, but at least rates aren't rising now, and some evidence suggests home affordability could increase this year, making 2026 a fairly good time to buy.

Federal Reserve Meeting Statement – December 2025

The Fed reduces rates by 25 basis points (0.25%)

On December 10, 2025, the Federal Reserve voted to cut interest rates by a quarter of a point at its year-end meeting, bringing the target rate to between 3.50% and 3.75%. This marked the Fed’s third rate cut in 2025, following two 25-basis-point cuts in September and October. This sequence of changes leaves the benchmark rate three-quarters of a percentage point lower than the 4.25% to 4.50% target rate in January.

While these results are in keeping with many expert predictions, the December decision came amid sharp division of the 19-member committee, and mixed economic signals, including persistent inflation, rising unemployment rates, and weak hiring tendencies.

Why did the Federal Reserve cut interest rates in December?

Due to steady inflation rates, all signs pointed to rates remaining unchanged in December at the conclusion of the October meeting. However, New York’s Fed president underestimated pricing pressures, calling them a temporary result of tariffs expected to ease by mid-2026. This modification suggests a greater concern for rising unemployment than inflation, consistent with its dual mandate. The prolonged government shutdown delayed CPI data, forcing the decision to be reached without all the necessary information.

In November, Payroll provider ADP reported that companies lost an estimated 32,000 jobs, and the unemployment rate in September reached 4.4%, the highest point in four years after three consecutive increases. These labor market concerns likely tipped the scales in favor of a cut, though dissent within the committee suggests it may be the last for some time, pending the release of full government data.

Federal Reserve Meeting Statement – October 2025

The Fed reduces rates by 25 basis points (0.25%)

On October 29, 2025, the Federal Reserve Bank concluded a two-day meeting amid a prolonged government shutdown that delayed the release of key economic data. By a 10-2 vote, the Fed cut rates by 25 basis points, bringing the overnight lending benchmark target to 3.75% to 4.00%, down from the 4%-4.25% that reflects the Fed's target range before the change. The two dissenting votes reflected opposing views, one of which favored a larger half-point cut, and the other preferring no rate cut at all.

Although the Fed didn’t provide any insights for December, further rate cuts are also expected. The central bank also announced plans to halt its quantitative tightening program and begin reinvesting maturing debt starting December 1, citing recent strains in short-term lending markets.

Why did the Federal Reserve cut rates in October?

Despite shutdown delays, the Federal Reserve still had sufficient information to justify a rate cut to fulfill its dual mandate of maintaining low inflation and low unemployment. While inflation is still above the 2% rate the Fed targets, it has cooled considerably since the post-pandemic inflation surge. From August to September, CPI showed just a 0.3% increase, putting the annual inflation rate at 3.0% instead of the anticipated 3.1%. Similarly, core inflation showed an annual gain of 3.00% – lower than the 0.3% and 3.1% economists had predicted.

This CPI data remained available to the central bank during the shutdown; however, Federal Reserve Chairman Jerome Powell acknowledged the absence of key data points in an October 14 speech. With earlier data showing rising unemployment and slower payroll growth, the Fed appears increasingly focused on supporting the labor market, reinforcing the case for lower rates.

Federal Reserve Meeting Statement – September 2025

The Fed reduces rates by 25 basis points (0.25%)

All eyes were on the Federal Open Market Committee of the Federal Reserve (Fed) on Wednesday, September 17, as many anticipated a reduction in the federal funds rate. The Fed delivered, voting 11-1 to reduce rates by 25 basis points (0.25%), putting the overnight funds rate in a range between 4.00%-4.25%. The newest Fed appointee, Stephen Miran, was the lone opposing vote in favor of a larger half-point cut.

A reduction in rates was not a surprise.

Stubbornly high post- pandemic inflation rates deterred the Fed from easing interest rates, despite the White House’s opposing position. However, several recent data points gave the Fed the confidence to cut for the first time since December.

Economic factors prompting a rate cut

Amid this month’s political turmoil, policymakers remained focused on economic fundamentals that supported a rate cut. In August 2025, the U.S. Bureau of Labor Statistics reported CPI inflation easing to 2.9%, still above the Fed’s 2% target. Labor markets simultaneously weakened; unemployment edged up to 4.3%, and job growth slowed, with only 22,000 job openings in August.

The Bureau additionally released preliminary revisions showing the U.S. economy added 911,000 fewer jobs than initially estimated through March 2025. The U.S. Department of Labor added additional strain in their report of initial jobless claims rising to 263,000 the week of September 6, the highest since October 2021. With the Fed’s dual mandate requiring both price stability and maximum employment, these mounting labor-market risks, combined with elevated recession concerns, made a rate cut increasingly difficult to avoid.