Powell Calls Rates Neutral After 25 Basis Point Cut

In short: Federal Reserve cut its benchmark rate by 25 basis points, as the likely last of the risk management cuts. Chairman Jerome Powell classified the current range as one that should neither stimulate nor restrict the economy.

What’s next for rates: 

The Federal Reserve cut its benchmark rate by 25 basis points, as widely expected. Chairman Powell noted that rates are now 175 basis points below the cycle peak and within estimates of the neutral rate; in other words, it’s a safe place to park until visibility improves. Further cuts would have to be supported by warning signs in upcoming economic data. Although several data releases are scheduled before the January FOMC meeting, Powell said he will view some of them with a “skeptical eye” due to potential data-collection distortions from the government shutdown. He also emphasized that monetary policy operates with long lags, meaning it may take a few more months to fully assess the effects of earlier rate cuts.

What’s the impact on housing? 

Zillow forecasts that mortgage rates are unlikely to fall below 6% in 2026. Still, even without drastic declines in borrowing costs, 2026 is a year for small wins. Affordability is set to gradually improve as modest rises in home values means that incomes can catch up, opening up a wider pool of shoppers able to buy a home.