Federal Reserve statement explained – July 2026

In its July 2026 meeting, the Federal Open Market Committee of the Federal Reserve held the target range for the federal funds rate steady at 3.5% – 3.75%. The decision is the fifth consecutive time the committee has left the rate unchanged following three consecutive rate cuts in late 2025.

As of the July 29 announcement, the average mortgage rate is 6.75% for a 30-year fixed-rate mortgage and 5.875% for a 15-year fixed-rate mortgage. Ahead of the meeting, some economists had speculated that the Fed may increase interest rates slightly after holding the federal funds rate steady since the start of the year.

Economy deals with rising energy costs

The news comes as the U.S. economy grapples with rising costs of gas, diesel, and electricity, due in large part to the war in Iran and the artificial intelligence boom.

Setting the federal funds rate allows the Fed to influence the economy and balance the push and pull between employment and inflation. Cutting interest rates can address a weak labor market by reducing borrowing costs and stimulating the economy. The Fed typically reduces rates to increase consumer spending and demand for goods, which can stimulate employment.

However, if the Fed makes borrowing too easy, it can send prices soaring and accelerate inflation. The Fed typically increases the federal funds rate to tame inflation and an overheated economy.

Employment remains steady

According to the Bureau of Labor Statistics, the unemployment rate showed little change in July 2026, sitting at 4.2%. The U.S. economy added only 57,000 jobs in June, and wage growth increased by only 3.5%, trailing the latest inflation rate of 4.2% for the third month in a row. The latest jobs report also included downward revisions to April and May, indicating even less hiring than originally measured.

This complicates the Fed’s job of balancing prices and the jobs market. Holding the federal funds rate steady can help keep inflation in check, but it could also hold back the jobs market. A rate cut could lower borrowing costs but further fuel inflation.

While the Fed held off on increasing rates this time, many investors think a rate hike could occur by the end of the year.

What this means for home buyers

When interest rates spiked in 2022 and 2023, many would-be home buyers were priced out of the market. If you've been tracking interest rates because you're looking to buy a home soon, it's important to know that the relationship between mortgage rates and the federal funds rate is not as direct as one might expect.

While changes to the federal fund rate have a more immediate impact on short-term loans and bonds, 30- and 15-year mortgage rates are more affected by Treasury yields and the economy. When the 10-year Treasury note changes, mortgage rates tend to follow suit. This helps explain why the current average mortgage rate is sitting 3 percentage points higher than the current federal funds rate.

That said, the federal funds rate affects the 10-year Treasury note rate, which is why mortgage rates tend to track short-term loan rates. A hold on the federal funds rate indicates that mortgage rates aren't expected to drop dramatically any time soon. In fact, some current home buyers may have chosen to lock in their rates ahead of the July 29 meeting due to the risk that a rate hike could push mortgage rates higher.

This can be frustrating news for buyers who have been priced out of the market and can't afford a monthly payment at current rates. If you can afford a monthly mortgage payment but have been trying to time the market to get the lowest possible rate, you may be better off focusing on affordability rather than the rate. It may not be worth focusing solely on the rate and giving up the opportunity to buy sooner and build equity.

Any housing market projections, forecasts, or predictions referenced are forward-looking statements based on current information and assumptions as of the date provided. Such statements are inherently uncertain and subject to risks and changes beyond our control.

No guarantee is made regarding the accuracy, completeness, or future performance of any projection. This content is not intended to influence or determine any individual financial, investment, lending, or real estate decision.