12/17/2025
Mortgage rates in limbo as Fed officials debate inflation, jobs data
Comments by officials point to ongoing conflicts between the Fed’s dual mandate of maximum employment and stable prices
December 16, 2025, 1:52pm by Neil Pierson
The latest in a string of Federal Reserve interest rate cuts appears to have done little to impact mortgage rates, which have remained steady since the Fed’s Dec. 10 decision to lower benchmark rates by a quarter point.
On Monday, Mortgage News Daily reported that 30-year fixed rates averaged 6.29%, down 7 basis points (bps) in the past week.
HousingWire’s Mortgage Rates Center, which tracks locked loans across all credit profiles, showed that 30-year conventional loan rates averaged 6.34% on Tuesday, up 1 bps from a week ago. Rates for 30-year loans through the Federal Housing Administration (FHA) were at 6.11%, down 1 bps during the week, while rates for jumbo loans were down 2 bps to 6.25%.
Fed policymakers won’t meet again until late January. While a fourth straight cut is in play, Chair Jerome Powell signaled last week that a higher bar will need to be cleared. Economic projections showed that the majority of officials penciled in one additional cut for 2026.
During his post-meeting remarks, Powell touched on the impacts for housing.
“Housing is going to be a problem,” he said. “We can raise and lower interest rates, but we don’t really have the tools to address a secular, structural housing shortage.”
Jobs vs. inflation
The Fed will be keeping a close eye on labor and consumer price data as it gauges the impact of its rate-cutting cycle that began in September 2024. The federal funds rate has been lowered by 175 bps since then and now stands at a range of 3.50% to 3.75%.
After a pause in data releases during the federal government shutdown, the U.S. Bureau of Labor Statistics (BLS) on Tuesday reported employment data for October and November.
Nonfarm payroll employers added 64,000 jobs last month, but an estimated 105,000 jobs were cut in October, and the unemployment rate of 4.6% represents a four-year peak. The weak numbers could support the case for faster and deeper rate cuts — something that Fed governor Stephen Miran has vocally supported.
The next key inflation report, the Consumer Price Index for November, will be released by BLS on Thursday. Stagnant or slower inflation would bolster the argument for lower rates as the odds of another 25-bps cut currently stand at 24%, according to the CME Group’s FedWatch tool.
Miran offered detailed comments on the outlook for inflation during a speech on Monday in New York City. He referenced the Fed’s reliance on the Personal Consumption Expenditures index as being “not ideal as a measure of current supply and demand pressures” for housing. And he said other datasets are showing a significant slowdown in rental housing costs that he expects to continue.
This is a key reason he supports looser interest rate policy that is forward-thinking and less reliant on post-pandemic corrective actions.
“Keeping policy unnecessarily tight because of an imbalance from 2022 … will lead to job losses,” Miran said. “There was a large bout of inflation that resulted in an increase in prices after the pandemic. While American families are still rightly distraught with that experience and unhappy with affordability, prices are now once again stable, albeit at higher levels. Policy should reflect that.”
Dissenting views
John Williams, the president of the Federal Reserve Bank of New York who voted for last week’s rate cut, spoke Monday in New Jersey about the state of the economy and said that “monetary policy is well positioned as we head into 2026.”
Williams focused on the Fed’s “imperative” goal of returning inflation to 2% annually, which according to its newest projections, is not expected until 2028. But Williams anticipates this will happen in 2027 as tariff-driven price increases have not been as severe as he’d originally expected.
“I do not see any signs of tariffs contributing to second-round or other spillover effects on inflation,” he said. “In particular, no broad-based supply chain bottlenecks have emerged, shelter inflation has declined steadily, and measures of wage growth point to a continued gradual slowing.”
Last week, the Federal Reserve Bank of Kansas City — headed by Jeffrey Schmid, who has voted for no rate cuts at the last two Fed meetings — published an economic bulletin centered on potential tariff-driven headwinds to employment growth.
The authors noted that national job growth has dropped from an average of 170,000 per month in 2024 to about 75,000 per month through the first eight months of 2025. The analysis claimed that monthly job gains could’ve averaged 94,000 and that the unemployment rate would’ve been 10 basis points lower if tariffs hadn’t been implemented.
Mortgage rates stayed near 6.3% after the Fed’s December cut, as officials weigh further moves amid persistent housing shortages.
