Federal Reserve Chairman Jerome Powell hinted Friday that the central bank may cut interest rates in September — a shift that could give the housing market a much-needed boost.
At a symposium in Jackson Hole, Wyoming, Powell warned of persistent inflation and said the labor market could weaken further.

“The balance of risks appears to be shifting,” Powell said. “While the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers.”

Over the course of the year, Powell and other Fed governors have held rates steady for five consecutive meetings, pointing to inflation remaining somewhat elevated and the still murky economic outlook. However, Powell signaled today that the economic trajectory is changing in a direction that may call for the central bank to adjust its policy stance. Many took his comments to suggest policymakers are becoming increasingly focused on the softening job market, often a sign the economy is weakening and may need the boost of a rate cut.

“In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside — a challenging situation. When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate,” Powell said.

The housing market has stalled as the central bank has stood firm on its restrictive policies. The Federal Reserve raised the federal funds rate in March 2022, and mortgage rates climbed from 3.7% to 4.6%, sapping buyers' purchasing power. It's worth noting that while Fed action often influences the direction of mortgage rates, Fed members don't actually set them. Lenders do, and they usually track 10-year Treasury bonds. A rate cut is no guarantee that mortgage rates will go down. The last time the Fed cut rates, in December 2024, mortgage rates remained elevated.

Many housing experts, politicians and Federal Housing Finance Agency Director Bill Pulte argue that rate cuts will encourage buyers to step back into the market.

Erika Ludvigsen, Homes.com's national director of residential analytics, agrees. "The interest rate cuts by the Fed are expected to translate into lower mortgage rates and improved housing affordability. That, in turn, should lead to higher buyer demand," Ludvigsen said. "Lower rates should stimulate the economy and the labor market, which have shown signs of weakness in the past few months, and give consumers the confidence to make one of the biggest financial decisions — buying a home.”

As of Thursday, the 30-year, fixed-rate mortgage averaged 6.58%. That's unchanged from last week, but the rate is at its lowest point this year, according to mortgage giant Freddie Mac. The rate had fallen for four consecutive weeks.

To be sure, lower mortgage rates, coupled with a slowdown in home price growth and a surge in listings, could give the sluggish market the nudge it so desperately needs.

After years of historically low for-sale listings, the number of houses on the market in July surpassed pre-pandemic levels, according to exclusive Homes.com data. Inventory increased 26%, or by nearly 300,000 homes, in July compared to the same time a year earlier. In all, there were more than 1.4 million houses for sale, marking the largest monthly supply since at least 2017.

Homes.com data also revealed that home prices rose 2.1% last month compared to July 2024. The median price for all properties — single-family homes, townhouses and condos — increased $8,000 to $393,000, but that growth has continued to moderate, according to Ludvigsen.

Elevated mortgage rates and growing numbers of homes for sale could keep moderating national home prices in the second half of the year, Ludvigsen said. The overall appreciation is likely to remain positive, even as prices in some individual markets fall.

Consumers continue to pay more for goods and services. Inflation holds steady at 2.7%, above the 2% goal set by the Federal Reserve.

Still, Powell said, "The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over the coming months, with high uncertainty about timing and amounts." The question for the central bank remains "whether these price increases are likely to materially raise the risk of an ongoing inflation problem."

Another dilemma, Powell referenced, is a weakening labor market as the key motivation for reconsidering rate cuts. The job growth cooled sharply in July as the U.S. economy added 73,000 jobs last month, according to the Bureau of Labor Statistics. This follows May and June numbers that were revised down by nearly 260,000.

Powell gave today's speech during a turbulent period for the Federal Reserve. This week, Pulte and President Donald Trump called for Federal Reserve governor Lisa Cook to resign amid mortgage fraud accusations.

Powell signaled that the Federal Reserve would not be swayed by politics. "Monetary policy is not on a preset course," he said. Fed committee "members will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach."

In recent months, Powell has faced a whirlwind of pressure to cut rates — and demands from Pulte for his own letter of resignation over the sluggish housing market. Members of Congress piled onto the pressure in June, criticizing his agency's rates for troubling homeowners and aspiring buyers. On multiple occasions, Powell referenced his choice to stand firm on rates due to inflation forecasts from Trump's tariff policies.

"It will continue to take time for tariff increases to work their way through supply chains and distribution networks," Powell said Friday. "Moreover, tariff rates continue to evolve, potentially prolonging the adjustment process. It is also possible, however, that the upward pressure on prices from tariffs could spur a more lasting inflation dynamic."