Federal Reserve is poised to leave rates unchanged as it tracks progress toward a ‘soft landing’

Since Federal Reserve officials last met in July, the economy has moved in the direction they hoped to see: Inflation continues to ease, if more slowly than most Americans would like, while growth remains solid and the job market cools.

When they meet again this week, the policymakers are likely to decide they can afford to wait and see if the progress continues. As a result, they’re almost sure to leave their key interest rate unchanged when their meeting ends Wednesday.

The cooling of inflation suggests that the Fed is edging toward a peak in the series of rate hikes it unleashed in March of last year — the fastest such pace in four decades, one that has made borrowing much costlier for consumers and businesses.

The focus for Wall Street investors and analysts now is shifting toward what comes next. Some clues could come in the updated interest rate projections it releases each quarter and at a news conference with Chair Jerome Powell.

Economist and Haas School of Business professor Jim Wilcox, said the pandemic has made inflation predictability unreliable.

"I think it's still a good chance that they will raise rates on more time this year," he said.

Marin County realtor Valerie Castellana said she sees signs, that even with higher rates, though much slowed down, the market is still moving.

"I recently closed on two properties. Both of them went over the asking price with multiple offers," she said.

Home loan broker Fif Ghobadian said,"All the metrics, what's happening in the economy with are all pointing to a softer economy and hence, we have to release the pressure on these rates."

Rate reductions would help a lot given today's reality.

"It's both the interest rates going up and the prices are either staying the same or closer to same or increasing a bit," said Castellana.

But Wilcox warns that real cuts are still many months away, even after the Feds call off future increases.

"They're going to do it with the intention of holding those rates at the higher level for a very long period of time. I would have thought in the order of six months or so," Wilcox.

That can only serve to increase the pent-up demand already sitting on the side lines.

"If the Feds makes it clear that they will be lowering rates, mortgage rates can drop by a very large amount very quickly," said Wilcox.

"I have personally, myself over 600 people who have been pre-approved waiting. Imagine when those flood gates open,"said Ghobadian.

The sweet spot seems to be somewhere mid-2024, slowly lowering will into 2025