Rates stayed relatively flat last week, even as the Fed held off on cutting. Here’s a quick look at what happened — and what could move markets next.
Interest Rates Hold Steady, But Eyes Are on Inflation
“Don’t think me unkind, words are hard to find.”
– “De Do Do Do De Da Da Da,” The Police
The Federal Open Market Committee – May 7th Statement
The Fed’s message was clear(ish):
“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run… In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4.25 to 4.50%…”
Plain English version? The economy’s chugging along. Jobs are holding strong. But inflation’s still sticky, and the Fed is nervous.
They’re leaving rates where they are — for now — while watching inflation, jobs, and global risk factors closely before making their next move.
China and US Set to Talk
In a positive turn, the US and China announced they’ll meet in Switzerland this weekend to talk tariffs.
A Chinese Ministry spokesperson said the talks reflect “global expectations, China’s interests, and the appeals of US industry and consumers.” Meanwhile, US Treasury Secretary Scott Bessent commented, “This will be about de-escalation — we’ve got to de-escalate before we can move forward.”
Why does this matter? Because uncertainty on the trade front is a big reason the Fed hit pause. Progress here could bring clarity — and potentially help loosen the Fed’s stance later in the year.
Solid Appetite for US Debt
The Treasury sold $42 billion in 10-year Notes last Tuesday — and demand was strong.
This kind of appetite for US bonds is what helps keep mortgage rates in check. In fact, we held near the best rate levels of the week after the auction.
30-Year Mortgage Rates
The 30-year fixed mortgage averaged 6.76% as of May 8 — flat from the week before.
Meanwhile, the 10-Year Treasury (which mortgage rates tend to follow) is holding just above 4.20%, a technical support level. Rates have been bouncing between lower highs and lower lows ever since hitting 4.60% weeks ago.
Bottom Line
After April’s wild ride, May has started off with a steadier tone. But don’t get too comfortable — the Fed probably won’t cut rates in June unless inflation cools and global trade tension eases. There’s still a lot hanging in the balance.
Looking Ahead
The Consumer Price Index (CPI) drops next week, and that’s the main event.
We’re sitting at the lowest inflation in nearly four years, but prices are still rising faster than the Fed’s 2% target. If the CPI number comes in hot, rates may take a hit. If it’s cooler, we might finally see some relief.
Mortgage Market Guide Candlestick Chart
For homebuyers and refinancers, mortgage rates are critical and closely tied to mortgage bond prices. The chart below tracks the Fannie Mae 30-year 6.0% coupon. The rule is straightforward: rising bond prices lead to lower mortgage rates, while falling prices drive rates higher. The right side of the chart shows prices stuck beneath key resistance, limiting higher prices/lower rates.
Chart: Fannie Mae 30-Year 6.0% Coupon (Friday, May 9, 2025)
Economic Calendar for the Week of Week of May 12 – 16
