Federal Reserve Rate Cuts in View
The Federal Reserve’s monetary policy committee once again held constant the federal funds rate at a top target of 5.5% at the conclusion of its July meeting. In its statement, the Federal Open Market Committee (FOMC) noted:
“Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have moderated, and the unemployment rate has moved up but remains low. Inflation has eased over the past year but remains somewhat elevated. In recent months, there has been some further progress toward the Committee’s 2 percent inflation objective.”
Compared to the Fed’s June commentary, the current statement upgraded “modest further progress” from last month to “some further progress” with respect to achieving the central bank’s 2% inflation target. This change in wording moves the Fed closer to reducing interest rates. Importantly, the July policy statement also noted:
“The Committee judges that the risks to achieving its employment and inflation goals continue to move into better balance.”
This text, previewed by various Federal Reserve officials in recent weeks, makes it clear that the Fed has now moved from a primary policy focus of reducing inflation to balancing the goals of both price stability and maximum employment. Raising the goal of maximum employment up with inflation means that the Fed is now in position to lower the fed funds rate. However, the FOMC’s statement also noted (consistent with its commentary in May and June):
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
This wording is a reminder that the Fed remains data-dependent. Thus, although a reduction for the federal funds rate is in view, the timing will be data-dependent on forthcoming inflation and labor market estimates. Also keep in mind, inflation does not need to be reduced to a 2% growth rate for the Fed to cut. Rather, it just needs to be on the path to reaching that goal (likely in late 2025 or early 2026).
NAHB Chief Economist Robert Dietz provides more insights on expectations going forward in this Eye on Housing post.
Latest from NAHBNow
Aug 11, 2025
America’s Housing Supply Crisis: Is the Suburban Frontier Closing?A recent working paper titled “America’s Housing Supply Problem: the Closing of the Suburban Frontier?” dives into why the supply of new housing has shifted lower, especially in the sunbelt regions like Dallas, Atlanta and Phoenix.
Aug 08, 2025
Canadian Lumber Duties Hit 35% — And May Go Higher SoonThe U.S. Commerce Department announced today that it is more than doubling its countervailing duties on Canadian lumber imports from 6.74% to 14.63%.
Latest Economic News
Aug 11, 2025
Market Share for Modular and Other Non-Site Built Housing in 2024The total market share of non-site built single-family homes (modular and panelized) was just 3% of single-family homes in 2024, according to completion data from the Census Bureau Survey of Construction data and NAHB analysis.
Aug 08, 2025
Foundation Types in 2024: Slabs Continue to Rise, Crawl Spaces DeclineIn 2024, 73% of new single-family homes started were built on slab foundations, according to NAHB analysis of the U.S. Census Bureau’s Survey of Construction (SOC).
Aug 08, 2025
Weaker Demand for Residential Mortgages in Second QuarterIn the second quarter of 2025, overall demand for residential mortgages was weaker, while lending standards for most types of residential mortgages were essentially unchanged, according to the recent release of the Senior Loan Officer Opinion Survey (SLOOS).