Why have mortgage rates barely budged despite three Fed cuts?

The Federal Reserve has paused policymaking until late January while assessing economic data before additional rate cuts. Chair Jerome Powell said housing is a structural shortage that interest-rate policy cannot resolve, and emphasized monitoring labor and consumer price data to gauge the impact of the rate-cutting cycle that began in September 2024. The federal funds rate has been lowered 175 basis points to 3.50–3.75%. Recent BLS reports showed net job losses in October and modest job gains in November with unemployment at 4.6%. Governor Stephen Miran noted slowing rental cost data and questioned reliance on the PCE measure, supporting looser policy.

"Housing is going to be a problem, he said. We can raise and lower interest rates, but we don't really have the tools to address a secular, structural housing shortage. The Fed will be keeping a close eye on labor and consumer price data as it gauges the impact of its rate-cutting cycle that began in September 2024. The federal funds rate has been lowered by 175 bps since then and now stands at a range of 3.50% to 3.75%."

"Miran offered detailed comments on the outlook for inflation during a speech on Monday in New York City. He referenced the Fed's reliance on the Personal Consumption Expenditures index as being not ideal as a measure of current supply and demand pressures for housing. And he said other datasets are showing a significant slowdown in rental housing costs that he expects to continue. This is a key reason he supports looser interest rate policy that is forward"

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