FOMC Minutes Reveal Concern Over Housing, Economy Ahead of Rate Cut

Minutes from the Federal Open Market Committee’s (FOMC) most recent meeting reveal that policymakers expressed growing concern about ongoing weakness in the housing sector, commercial real estate, and broader economic conditions prior to last month’s decision to implement a 25-basis-point rate cut.

Elevated Economic Uncertainty

According to the newly released minutes, Federal Reserve staff noted that economic projections remained highly uncertain, primarily due to unpredictable changes in policy related to trade, immigration, fiscal spending, and regulation. These uncertainties, in turn, could have significant effects on growth and labor markets.

The report stated:

“Risks to employment and the labor market were judged to have become a little more tilted to the downside, stemming from the recent softening in labor market conditions amid modest real GDP growth. The staff continued to view the risks around the inflation forecast as skewed to the upside, as the projected rise in inflation this year could prove to be more persistent than assumed in the baseline projection.”

Several participants highlighted that housing remains a key area of vulnerability, noting that further deterioration in home sales or prices could amplify downside risks to overall economic activity.

Housing Market Weakness

Realtor.com Chief Economist Danielle Hale commented on the Fed’s observations:

“The housing market has been curiously weak in recent years. Amid the ongoing lack of affordability, there is concern that demand for new home sales may continue to soften, with ripple effects on employment and construction-related sectors.”

Hale emphasized that while the Fed’s policy actions target short-term interest rates, mortgage rates—crucial for homebuyers are influenced by expectations of future monetary policy. In some cases, long-term mortgage rates may even rise despite Fed rate cuts, as seen in late 2024 and early 2025.

Market Implications

Wells Fargo Advisors noted that the Fed faces a delicate balance in its approach:

“The threat of both inflation and unemployment rising simultaneously creates significant challenges for monetary policy. While additional rate cuts may stimulate the economy, tariff-related inflationary pressures could shorten the easing cycle. Fixed-income investors may find intermediate maturities (3–7 years) optimal, offering attractive yields while mitigating interest rate risk.”

The minutes suggest that Fed officials are closely monitoring the interplay between inflation, employment, and housing, indicating that future policy decisions will continue to weigh these factors carefully.

What’s Next

Markets are currently pricing in a high likelihood of another 25-basis-point rate cut at the upcoming FOMC meeting on October 28–29, according to the CME FedWatch Tool. Economists expect the Fed to continue its cautious approach, balancing efforts to support housing and broader economic growth while remaining vigilant against persistent inflation pressures. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.