The Federal Reserve on Wednesday kept benchmark interest rates at a range of 5.25% to 5.5%, the eighth consecutive meeting in which rates were unchanged.

Members of the Federal Open Market Committee (FOMC) said in a statement that they would “carefully assess incoming data, the evolving outlook, and the balance of risks“ before making “any adjustments to the target range for the federal funds rate.“ The FOMC also supported the central bank’s ongoing reduction to its holdings of Treasury securities, agency debt and agency mortgage-backed securities.

The announcement was not a surprise given the signals that Fed policymakers have shown over the past few months. Market analysts had also given long odds for a rate cut this week, with near-unanimous agreement that no changes would occur, according to the CME Group‘s FedWatch tool.

In his customary post-meeting press conference, Fed Chair Jerome Powell reiterated some of the same observations he’s made in recent months — namely a more balanced labor market, substantially eased inflation compared to two years ago and an unemployment rate that remains relatively low.

“Our confidence is growing because we’ve been getting good data,” Powell said. “It doesn’t look like an overheating economy. It looks like an economy that’s normalizing.”

The federal funds rate has not changed since July 2023, when the Fed implemented a quarter-point hike, the last in a series of increases designed to curb 40-year-high inflation. Benchmark rates were last lowered in March 2020 in response to the COVID-19 outbreak.

Mortgage rates have decreased by roughly half a percentage point since peaking in May but are stubbornly hovering around 7%. The pace of existing-home sales has slowed sharply since peaking in February, although pending sales grew by 4.8% from May to June, according to data released Wednesday by the National Association of Realtors.

Attention now turns to the Fed’s meeting in September, where analysts are equally unanimous that rates will be lowered. Many observers, including The Wall Street Journal, have been arguing in favor of a cut due to cooler inflation and rising unemployment — factors that the Fed itself has mentioned as essential before any cuts can be made.

The Journal recently pointed out that core inflation — which excludes volatile prices for items like food and energy — fell to an annualized rate of 2.6% in June. That was down from 4.3% one year ago and a peak of 5.6% in February 2022. And a few weeks ago, Powell said that officials were unlikely to wait until inflation reached the preferred target of 2% before making cuts.

In a statement, Bright MLS chief economist Lisa Sturtevant cautioned that even if benchmark rates are lowered in September, consumers are unlikely to see much downward movement in the cost of a home loan.

“Prospective homebuyers expecting a big drop in mortgage rates after the Fed’s September meeting are going to be disappointed,“ Sturtevant said. “The mortgage market may have already largely built in the impending rate cut, as we’ve seen mortgage rates come down over the past few weeks.  

“Mortgage rates will come down more this fall, landing at about 6.4% by the fourth quarter,“ she added. “Home prices, however, are not projected to fall so affordability is still a key challenge, particularly for first-time homebuyers. More inventory coming onto the market in the second half of the year will provide more options for buyers and will also moderate home price growth in the months ahead.” 

Fed officials have publicly stated that the November election will play no role in rate-setting policies, but Democrats and Republicans are inserting their agendas into the conversation.

In a recent interview with Bloomberg — given before Joe Biden dropped out of the race — Republican presidential nominee Donald Trump said the Fed should not not cut rates prior to the election. Trump also refuted previous reports that he’d seek to remove Powell from his post if he were elected for a second time.

Democratic lawmakers, meanwhile, have been calling for rate cuts for some time, with Sen. Elizabeth Warren of Massachusetts among the most vocal proponents.

In response to a reporter’s question about whether a cut in September is a “baseline expectation,“ Powell said Wednesday that the decision hinges on a number of data points and that the FOMC has not committed to any future policy changes — even two months down the road.

“If we were to see, for example, inflation moving down quickly, or more or less in line with expectations … and the labor market remains consistent with its current condition, then I would think that a rate cut could be on the table at the September meeting,“ Powell said.

“If inflation were to prove stickier and we were to see higher readings for inflation — disappointing readings — we would weigh that along with the other things. I think it’s not going to be just any one thing. It’s going to be the inflation data. It’s going to be the employment data. It’s going to be the balance of risks as we see it.“