FOMC Commentary from MBA's Mike Fratantoni

The following is MBA SVP and Chief Economist Mike Fratantoni’s commentary following the Federal Reserve’s FOMC statement released this afternoon on monetary policy and the economy:

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"While the FOMC statement noted that inflation has 'eased somewhat,' the unanimous vote of monetary policymakers to raise rates another 25 basis points – and signal that further increases are likely – indicates that markets should anticipate that the Federal Reserve will keep short-term rates higher for longer. This means rates will probably peak at about 5% in March, in the Fed’s efforts to force inflation down through a marked slowdown of the economy.

"While there are signs of slowing wage growth and other hints of a weakening job market, we expect that a slowdown in economic activity will ultimately result in the unemployment rate increasing significantly over the course of 2023.

"The Federal Reserve controls short-term rates, but long-term rates, including 30-year mortgage rates are a function of market expectations for the path of the economy.  And investors are betting that the economic slowdown and the Fed's eventual victory over inflation will result in lower rates over time.  MBA is still forecasting a modest drop in mortgage rates through 2023, ending closer to 5% rather than the 6% we have today."