9/22/25 REcap: The Fed Cut Rates For The First Time in 2025

The Fed Cut And....mortgage rates stayed flat. Avid readers of this newsletter weren't surprised. The rate cut was fully priced in after the inflation data last week, and as I'll cover below, the Powell press conference left many wondering... Would the Fed cut if they the labor market was any stronger?

Our LendFriend Learning Center has now has over 150 articles to help homebuyers buy with confidence. Check out top articles of the week at the bottom of this email.

The Fed Finally Cuts

The wait is over. For the first time in 2025, the Federal Reserve decided to cut the Fed Funds Rate — trimming it by 0.25%. Chair Powell framed the move as a careful balance between inflation that “remains somewhat above target” and a labor market that’s “showing signs of softening.” 

It was a decision wrapped in politics as much as economics. President Trump has loudly demanded a bigger 50-basis-point slash (and his new appointee Stephen Miran echoed much of the same), but Powell opted for the more traditional move as he made it clear that if not for a soft labor market, we wouldn't have gotten a rate cut at all. As he explained, "There are no risk-free paths ... It's not incredibly obvious what to do," Powell told reporters during his press conference last week following the rate cut announcement. "We have to keep our eye on inflation at the same time, we cannot ignore ... maximum employment."

Markets reacted with their usual mix of relief and skepticism. Mortgage rates had already drifted lower leading up to the meeting, reflecting expectations for not just this cut but the expectation for 3 cuts in total for 2025. History shows the real story isn’t the action itself — it’s what traders believe comes in the future. Mortgage Rates hinge on the market expecting another 0.25% rate cut on October 29th and a final 0.25% rate cut on December 10th. There's even a 35.6% probability that we'll see another 0.25% rate cut on January 28, 2026. It's this expectation that influences mortgage rate pricing.

For homebuyers, the bottom line is this: rate cuts don't lower mortgage rates. How the market perceives the Fed will act does. Mortgage rates just touched their lowest levels in nearly a year, and unless more data comes out to suggest the Fed will cut faster and harder (i.e., inflation is better than expected or jobs data is worse than expected), rates are unlikely to fall much more from here in the short term.