Federal Reserve Chair Jerome Powell’s speech on Friday at the Jackson Hole Economic Symposium left real estate and mortgage professionals cautiously optimistic. While expectations are building for lower interest rates, volatility remains a concern.
In his final address as Fed chair at the Federal Reserve Bank of Kansas City’s annual conference, Powell signaled the possibility of a rate cut at the next Federal Open Market Committee (FOMC) meeting that concludes Sept. 17. He also announced changes to the Fed’s operating framework. Investors responded by driving the 10-year Treasury yield down to 4.2%, pulling the 30-year mortgage rate to about 6.5%.
“Mortgage rates have traded lower for now, which is a win for borrowers and lenders,” said Geno Paluso, CEO at mortgage servicing software company Sagent. ”But lenders must stay prepared for continued rate volatility as the Fed and markets balance unemployment and inflation risks.”
Kevin Peranio, chief lending officer and partner at Paramount Residential Mortgage Group (PRMG), added that softening labor conditions are fueling the downward trend in mortgage rates, creating more revenue for larger lenders to invest in artificial intelligence and operational efficiencies.
“Rates have further to fall and it has been sustained all year – labor and inflation reports are critical to sustain the trend” Peranio said. “Volatility is expected as rates don’t move down in a straight line. With inflation elevated due to tariff uncertainty, any decent jobs report can cause an immediate uptick in rates.”
Signals from Powell
Powell signaled Friday that inflation has moved “closer to our objective” and that upside risks “had diminished.” The core Personal Consumption Expenditures (PCE) index reading currently stands at 2.9% as the effects of tariffs continue to “accumulate,” he said.
According to the Congressional Budget Office (CBO), as of Aug. 19, the effective tariff rate on goods imported into the U.S. has risen by about 18 percentage points compared to 2024 trade flows.
At the same time, the labor market is no longer “overheated,” the Fed chief noted. Unemployment has climbed by nearly a full percentage point — something that typically hasn’t happened outside of recessions. And Powell warned that downside risks to employment are increasing.
“When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate,” Powell said. He added that, “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
Markets took his comments as another sign of easing ahead. According to the CME Group’s FedWatch tool, about 83% of investors expected a 25 basis-point rate cut in September as of Friday afternoon — up from 75% just a day earlier and 58% a month ago.
Beyond September, Powell emphasized that “monetary policy is not on a preset course,” noting that the FOMC will continue to decide based solely on incoming data.
“For the housing sector, even modest rate relief could improve affordability, revive buyer interest, and offer a much-needed boost to builders and lenders heading into the fall,” First American senior economist Sam Williamson said in a statement.
Realtor.com senior economist Jake Krimmell added that mortgage rates holding at 10-month lows are already offering a “boost to affordability and, potentially, to buyer sentiment.”
“That relief is welcome after several years of high borrowing costs eroded consumers’ purchasing power, leaving this summer especially frustrating for buyers, sellers, and builders as both existing and new home sales stayed sluggish,” Krimmell added.
Long-term change
Powell also outlined changes to the Fed’s policy framework. The central bank is moving away from its prior “makeup” strategy, which aimed to keep inflation expectations well anchored by allowing inflation to run moderately above 2% for a period of time.
Under the revised framework, monetary policy will remain forward-looking, account for the lagged effects on the economy and continue to target a 2% longer-run inflation rate. But according to Krimmel, the Fed now appears more willing to lean against labor market weakness — even if inflation remains slightly above target.
“If Powell’s new framework signals a steadier commitment to balancing inflation and employment risks, it could reduce uncertainty and stabilize rate expectation,” Krimmel said. “Going forward, resolving economic uncertainty will be key for restoring consumer confidence and jumpstarting the housing market this fall, and beyond.”
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