Federal Reserve statement explained – October 2025

The Federal Open Market Committee of the Federal Reserve (Fed) today lowered the target range for the federal funds rate by 0.25% to 3.75% – 4%. This range within which federal banks can trade funds overnight to fund their operations affects consumers when it comes to credit card rates, personal loans, savings, and may indirectly impact mortgages.

We’ll briefly go over some of the data that informed the Fed’s thinking. Before getting into what it means for home buyers and those looking to refinance. If you’re in the market for a mortgage, a Fed rate cut will generally be positive.

Economic conditions

Because of the ongoing government shutdown, the Fed doesn’t have quite the usual menu of economic data to look at in balancing its dual goals of maximizing employment and keeping a check on inflation. But through a combination of collection mechanics, timing, and immovable legal deadlines, officials have received useful info.

First, let’s turn to the labor market. While the Bureau of Labor Statistics (BLS) isn’t putting out its official report, the data is collected from state unemployment agencies, who for the most part are still reporting.

Depending on which analyst you look at, estimates for initial jobless claims in the U.S. are somewhere between 229,000 – 232,000.

The reason for the variance is twofold: Colorado, Tennessee, and Massachusetts weren’t reporting. The private firms trying to fill in the gap, names like Citigroup, Nationwide, and Goldman Sachs, are hypothesizing.

There’s also always a revision in the BLS data as more firms respond to the survey after the initial deadline. The same principle applies to this privately compiled data.

This is slightly elevated from the last report prior to the shutdown, when initial claims came in at 218,000. This isn’t entirely unanticipated because the uptick might be from furloughed federal workers as well as the layoffs in the private sector.

The BLS also looks at continuing claims for people who need unemployment insurance after the initial week, a proxy for the pace of hiring. While there will always be a certain number of workers displaced by changes due to industry changes in the need for retraining, in general, lower continuing claims mean most people are quickly finding new work.

Continuing claims came in at 1.942 million in the week ending October 11. As with the BLS, this is reported with a 2-week lag. The last official continuing claims number was 1.926 million on September 13.

On the inflation side, the Fed prefers to look at personal consumption expenditures (PCE). Together with the consumer price index (CPI), these are the two main price measures. The primary difference between the two is the weighting of items.

A scheduled PCE release hasn’t been missed because it typically comes out on the last Friday of the month. PCE in August was up 2.7% overall and 2.9% when food and energy were excluded. As a reminder, the Fed’s target for annualized inflation is 2%. A little bit of inflation keeps people buying things without letting prices get out of control.

Of course, August data is a little stale. Here the Fed got lucky based on a quirk of the law. Each year, the Social Security cost-of-living adjustment is calculated based on September CPI data. So this is the one report the BLS is going to produce prior to the end of the shutdown.

The September CPI report showed that inflation was up 0.3% for the month and 0.2% excluding food and energy. On an annualized basis, inflation is up 3% both for all items and when food and energy are taken out. Prices are running a little hotter than officials might like.

The Fed is confronting a conundrum: on the one hand, unemployment claims are starting to rise. At the same time, rate decreases that would spur business spending tend to push up inflation. As such, they’ve chosen to take a slow approach to dropping interest rates.

Based on projections released in September for the federal funds rate, the median projection for the rest of the year was 3.6%. If they follow the projected path, that could mean one more 0.25% cut at the December meeting of the Committee.

What this means for mortgages

If the Fed lowered the target range for the federal funds rate by 0.25%, then mortgage rates are going to drop by 0.25% across the industry, right? While we would love to tell you that, it’s a little more complicated.

Because mortgages are sold on the secondary market, mortgage pricing today is typically based on what traders expect the rate to be 60 days from now. This means any movement down is already priced in. For this reason, waiting on the Fed doesn’t always make sense.

The one time you might see market movements is if the traders are surprised by the direction or magnitude of the Fed’s move, but that doesn’t happen much. But down is obviously better for consumers than up. Down means more purchasing power for buyers and more room to take advantage of lower rates or existing equity in a refi.

If you’re not ready yet, that’s okay. One piece of advice is not to focus on the rate as much on whether the payment fits into your monthly budget and helps you accomplish your homeownership or financial goals. The rate is important, but it’s not the most important thing.

If you like what you see and are ready to get started, you can apply online.