Federal Reserve Rate Cuts in View

Economics
Published

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.

Subscribe to NAHBNow

Log in or create account to subscribe to notifications of new posts.

Log in to subscribe

Latest from NAHBNow

Land Development | Advocacy

Aug 29, 2025

Mapping Impact Fee Statutes Across the U.S.

NAHB has developed a new state-by-state map of impact fee enabling statutes designed to give builders, policymakers and housing advocates a clearer picture of where and how these fees are authorized across the country.

Material Costs

Aug 29, 2025

NAHB's Monthly Update Features Canadian Lumber Duties Talking Points

The update provides the latest messaging framework to help members articulate housing priorities and latest news related to the Canadian lumber imports and builder sentiment.

View all

Latest Economic News

Economics

Aug 29, 2025

Multifamily Absorption Rises in the Second Quarter

The percentage of new apartment units that were absorbed within three months after completion rose in the second quarter, according to the Census Bureau’s latest release of the Survey of Market Absorption of New Multifamily Units (SOMA).

Economics

Aug 28, 2025

Mortgage Rates Move Lower, Hitting 10-Month Low

Average mortgage rates in August continued their steady decline and are now at their lowest rate since last November.

Economics

Aug 27, 2025

Wood-Framed Home Share Increased in 2024

Wood framing continues to dominate the U.S. single-family home construction market, according to NAHB analysis of 2024 Census Bureau data.