The Federal Reserve cut interest rates for the second time in a row on Wednesday as it seeks to maximize employment without increasing inflation. 

In a statement following the conclusion of the Federal Open Market Committee’s October meeting, the committee said it recognized that job gains have slowed, the unemployment rate had increased but remained low through August, and inflation had increased. 

“The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run,” the FOMC said. “Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months.” 

The cut to the federal funds rate from 4% to 3.75% does not directly affect mortgage rates but influences them indirectly, so home shoppers should not expect to see immediate relief.  

Indeed, mortgage rates have been on the decline in recent weeks, with the 30-year fixed rate sliding from 6.37% to 6.30% during the week ended Oct. 24, according to the Mortgage Bankers Association, which noted mortgage applications jumped 7.1% during the week. 

“Lower mortgage rates are a good thing for potential homeowners, and the Fed is continuing its slow and steady approach to reducing the cost of mortgage lending, while keeping an eye on inflationary pressures,” Cotality Chief Economist Selma Hepp said. “In fact, our data shows that pending home sales are rising year over year. This is a trend that will continue, especially when it is widely expected that the Fed will reduce rates one more time this year.”  

In announcing the rate cut, the Fed said it “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.” 

Christopher McAllister, designated managing broker at McAllister Real Estate in Chicago, said the cut — and the others he expects to follow — will set the housing market up for a rebound in 2026.

“We will see a few more drops in the next few months, and it will continue to drive buyers back out, and sellers that are sitting on the fence will finally feel comfortable putting their homes on the market again,” he said. “Get ready, our spring market will be a busy one, and next year in general will be a great year.”