“Slowing the rate of balance sheet shrinkage, which is what the Fed decided to begin doing in June, equates to a slight loosening of monetary policy. It is, however, a gradual easing, as directionally the Fed is still shrinking its balance sheet by $60 billion per month.”
Marty Green, principal at Polunsky Beitel Green, agreed that over time, “this adjustment should have some positive impact on interest rates without the Fed needing to adjust the Fed funds rate.”
Mortgage rate outlook
Mike Fratantoni, chief economist of the Mortgage Bankers Association, said the Fed’s decision confirmed its expectations for mortgage rates, which it raised in its April forecast.
“We expect mortgage rates to drop later this year, but not as far or as fast as we previously had predicted,” Fratantoni said.
Meanwhile, Hepp doesn’t anticipate significant mortgage rate relief throughout 2024. However, she noted a potential bright spot in increasing housing inventory, especially at lower price points.
