Federal Reserve statement explained – May 2025

The Federal Open Market Committee (FOMC) has left the target range for the federal funds rate unchanged at 4.25% – 4.5%. Federal Reserve (Fed) Chairman Jerome Powell always speaks after the rate decision, so there may be some movement as the market continues to digest the announcement, but the hold on rates was anticipated.

If you’re in the market to buy a home or refinance your existing one, things remain stable for now. But we also know that changes in policy at the government level are just beginning to impact the economy. With that in mind, let’s try to provide some insight on the current conditions the Fed is seeing before we move on to what it means for you.

Economic conditions

The Fed is confronting a bit of a confused economic picture right now. On one hand, current data looks good. But current data is backward looking, so that’s being balanced against a cloudy economic forecast on the horizon.

Personal consumption expenditures (PCE) – the Fed’s preferred measure of inflation – continues to trend downward toward its 2% goal in the most recent data. Excluding food and energy, which are often removed due to volatility, core PCE was just 2.3% in March, according to the report from the Bureau of Economic Analysis (BEA).

Meanwhile, the Bureau of Labor Statistics said employers were still adding jobs in April. The unemployment rate remains steady at a relatively low 4.1% overall. But there are indicators even within this report that things may be a bit bumpy including manufacturing losing 1,000 jobs.

This matches up with a recent report from the Institute for Supply Management. The manufacturing sector is in contraction at 48.7%. Employment is falling slower compared to March, but it’s still shrinking at 46.5%. Anything below 50% indicates a downturn. However, prices for inputs used in manufacturing are rising, coming in at 69.8%.

Moreover, gross domestic product (GDP) was down 0.3% in the first advanced estimate for the first quarter, according to the advance assessment from the BEA. While this could be taken as a sign of a slowing economy, most analysts blame increased imports lowering net exports. The nation imported at higher levels to get ahead of tariffs.

The bottom line is that the data still looks pretty good and the Fed can only guess at the future at this point, so holding rates at the current level maintains optionality for officials.

What this means for home buyers

For home buyers, things are a bit of a mixed bag regarding what happens next. Rates should hold pretty steady. But there are reasons not to put too much stock in Fed decision day.

The press conference could always swing things. Traders have to predict what’s happening in the market up to 2 months in advance because there’s a lag between when your mortgage closes and when it trades on the bond market. What the Fed thinks today isn’t as important as what the market thinks officials will do in the future.

Moreover, the National Association of Home Builders says in an analysis that tariffs can increase the price of new homes. According to its estimates, about 7% of building materials came from a foreign nation.

Of course, existing homes might also increase their prices if a new going market rate is perceived. This could mean prices go up. Rates could also fall if there’s a future move by the Fed to get ahead of a potential economic downturn. At the same time, officials are trying to keep a lid on inflation, so rates might stay put or go up in the future.

There’s a lot of uncertainty right now, but if you’re buying a home and you see the home you want with a rate and monthly payment that makes it affordable for you, that’s what you should focus on. If you maintain good credit, you can refinance if the market moves in your favor later.

What this means for those refinancing

While rates are up off their historical lows, one big reason you might think about refinancing is that home equity is going to be cheaper than financing a home renovation with a personal loan or credit card. Because mortgage rates are lower than a lot of other choices, this also makes them a good option for those looking to consolidate debt.

As with buyers, you’re not wedded to the rate forever. If you maintain good habits and keep up your credit score, you can always look into refinancing again if rates drop.

Are you ready to consider your mortgage options? You can get your application started today.