The central bank has raised rates multiple times in the past year in a bid to mitigate the impact of inflation on the economy.
While savers have benefited from the Fed’s decision, homeowners have seen their repayments skyrocket as mortgage rates have gone up.
Last week, the Federal Open Market Committee (FOMC) agreed to halt raising interest rates following the last 10 months of constant increases.
This means that the Federal Funds Rate will remain at a range between five percent to 5.25 percent.
Following the news that the Consumer Price Index (CPI) rate of inflation for May 2023 fell to four percent, analysts believe there are “positive signs” the Fed’s intervention has worked.
As a result, experts believe mortgage rates could come down in the months ahead if this trend continues.
Maureen McDermut, a real estate agent with Sotheby’s International in Montecito, California, shared why an “eventual reduction” in interest rates could be on the horizon.
She explained: “A pause on rate hikes can be indicative that the Fed is seeing positive signs that inflation has been slowed to an acceptable level.
“For homebuyers, this means that they might see an eventual reduction in the mortgage interest rates in the coming months.
“A pause obviously won’t lower rates, but it will give prospective buyers confidence that the worst may be over in terms of rate hikes.
“I am already receiving calls from homebuyers that had previously put their search for a home on hold until the Federal Reserve rate hikes had stopped.”
Despite the Fed’s decision last week, many economists believe further interest rates will be implemented by the central bank.
This is due to inflation remaining well above the Federal Reserve’s two percent target that it wants to reach.
Recently, economists surveyed by the Financial Times predicted the Fed will likely raise interest rates to at least 5.5 per cent in the next couple of months.
If this were implemented by the central bank, it highest level the Federal Funds Rate has reached since 2007.
Of this poll, over two-thirds of respondents forecast the rate to reach between 5.5 and six percent.