2026 Retrospective: As we enter a new year, looking back at the Federal Reserve Rate Decision from January 2025 provides critical context for today’s 2026 mortgage outlook. This meeting marked the beginning of the “Transition Year” that eventually led to the current rate environment.
On January 29, 2025, the Federal Reserve’s Federal Open Market Committee (FOMC) announced its decision to maintain the federal funds rate within the target range of 4.25% to 4.50%. This Federal Reserve Rate Decision followed three consecutive rate cuts in late 2024. The Fed’s choice to hold rates steady reflected a cautious “wait-and-see” strategy, balancing robust economic growth against inflation that remained stubbornly above the 2% target.
Economic Context: The “Sticky” Inflation Challenge
Recent indicators suggested the U.S. economy was expanding at a solid pace, but inflation stood at 2.9% as of December 2024. In its official statement, the FOMC noted that “the economic outlook is uncertain.” For a broader view of how these decisions evolved, visit our Fed Meeting History Archive.
Political Pressures and the Fed’s Independence
The decision to keep rates unchanged faced significant criticism from the executive branch, advocating for deeper cuts to stimulate growth. Despite this, Fed Chair Jerome Powell emphasized independence, asserting that policy shifts would be driven by economic data. This tension was a recurring theme throughout The Transition Year as the market looked for long-term stability.
Impact on Kansas City Mortgage Rates
While the federal funds rate influences short-term lending, mortgage rates remained elevated, hovering around 7% in late January 2025. In the Kansas City metro, this “hold” meant that 30-year fixed mortgage rates stayed firm, prompting buyers in Overland Park and Lee’s Summit to focus on timing. Notably, Kansas City Fed President Jeffrey Schmid supported this cautious approach, citing the need to ensure inflation was fully contained.
Advice for Today’s Homebuyers
Understanding the volatility that follows Fed announcements is key to a successful 2026 strategy:
- Secure Your Protection: Use a mortgage rate lock to protect your payment from sudden market shifts.
- Monitor Local Trends: Stay informed on current mortgage rates in Kansas City as they respond to the 10-Year Treasury.
- Consult a Professional: Reach out to Rick Woodruff to explore if a mortgage refinance fits the current 2026 rate environment.
Historical Meeting Resources: 2025 Analysis
- December 2025: The “Holiday Pivot” & 2026 Rate Forecast – The Fed concludes the year with a final 0.25% cut and a roadmap for 2026.
- September 2025: The First Major Rate Pivot – The historic move that ended the “Higher for Longer” cycle and revitalized the KC housing market.
- March 2025: Volatility & The “Last Mile” – Market reactions to the Fed’s warning that the final push to 2.0% inflation would be the hardest.