The latest outlook shows strong expectations for a quarter-point cut as the Fed reviews easing inflation and softer spending ahead of Wednesday’s decision.
WASHINGTON — With Federal Reserve policymakers meeting this week, many home buyers, sellers, and owners are watching closely for clues about when borrowing costs might ease.
The CME Group FedWatch Tool, which tracks investor expectations ahead of each Federal Reserve meeting, shows roughly an 87% chance of a quarter-point cut at the upcoming meeting. The tool doesn’t predict policy, but it offers a snapshot of how strongly traders believe the Fed is leaning toward lowering rates.
The Fed is facing a tricky decision: It would typically keep rates high to fight inflation. At the same time, it is worried about weak hiring and a slowly rising unemployment rate. It hopes that reducing rates will spur more borrowing and boost the economy.
A future cut would not instantly lower mortgage rates, but it would help create downward pressure, making home loans, credit cards, and other borrowing slightly less expensive over time. A decision will be announced on Wednesday.
New inflation data released ahead of the meeting showed prices rose only modestly in September, continuing a months-long cooling trend. The Fed’s preferred inflation measure increased just 0.3% from August, and a key underlying measure rose 0.2%. Annual inflation now stands at about 2.8%, edging closer to the Fed’s 2% goal.
Consumer spending also slowed, suggesting households may be feeling the squeeze of high costs and borrowing rates.
Economists say the combination of easing inflation and softer spending is exactly what Fed officials have been waiting to see.
The Associated Press contributed to this report.
