No Fed Action in Key Market Week; Mortgage Rates Flatten

Weekly mortgage rates stayed basically unchanged this week. The average 30-year fixed-rate mortgage rose one basis point to 6.85% in the week ending July 30, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Mortgage rates are likely to hover where they are for the time being. The Federal Reserve just voted to keep short-term interest rates the same as central bankers continue their "wait-and-see" approach.

The Personal Consumption Expenditures Price Index (which includes the Fed's preferred inflation measure) won't be released until Thursday, and the latest jobs report comes out on Friday. This left the Fed without enough recent data to change direction today.

Markets anticipated this decision, with Fed watchers predicting that central bankers wouldn't cut rates until September at the earliest. If incoming data points to cooling inflation numbers, it will likely boost investor confidence that a 25 basis point cut may be announced on September 17. Lenders would bake this into rate offers ahead of time, meaning that we could see mortgage rates begin to drop in the coming weeks.

Potential barriers to a September rate cut

Mortgage shoppers shouldn't get too excited about lower rates just yet. With seven weeks between now and the next Fed meeting, a September rate cut is far from certain.

Central bankers could decide not to change rates if they don't have enough data to chart a clear trajectory for inflation and unemployment. The Trump administration's monetary policies are quickly evolving, which could make it more difficult for the committee to point to definitive economic trends.

A massive slate of new tariffs are due to take effect on August 1, after getting postponed in April. We've seen the initial results of earlier tariffs on markets, though import taxes for key trade partners like Canada, Mexico and South Korea still need to be hammered out.

Despite insistence from Commerce Secretary Howard Lutnick that "very few products are actually going to move their price," central bankers may not be convinced that the impact of these new tariffs on inflation will be apparent enough by September.

If tariff updates and two major economic reports weren't enough, Q1 earnings for nearly a third of S&P 500 members — including four of the "Magnificent Seven" U.S. tech giants (in this case Meta, Microsoft, Amazon and Apple) — will also be released this week. This will influence investor sentiment about the current health and robustness of U.S. financial markets.

Why you're hearing more about the Fed

The Federal Reserve has dominated the news recently because President Trump has urged central bankers to lower interest rates, with particular focus on Chair Jerome Powell. While this may sound reasonable enough to the average borrower — what home buyer wouldn't want lower rates? — there is strong policy reasoning behind the Fed's resistance.

One of the Fed's main goals is to control inflation without hurting employment numbers. When rates are lowered, it makes it cheaper for banks to borrow from one another, which boosts the supply of money. More money in the market can contribute to inflation, which the Fed really doesn't want to do if inflation is already rising.

While borrowers could see a short-term benefit in scoring lower interest rates, there are long-term implications for the economy if the Fed cuts at the wrong time. That is to say, in the minds of central bankers, there are worse things than high interest rates.

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Taylor Getler writes for NerdWallet. Email: tgetler@nerdwallet.com.

The article No Fed Action in Key Market Week; Mortgage Rates Flatten originally appeared on NerdWallet.