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Today, at its September meeting, the Federal Reserve’s Board of Governors, led by Chair Jerome Powell, voted 11-1 to lower the federal funds rate by 25 basis points, marking the central bank’s first rate cut of 2025. Newly appointed Board member Stephen Miran voting against the decision, favoring a larger half-point cut. The decision was highly anticipated in Washington and reflects growing concern over slowing economic conditions, particularly in the labor market and housing sector.
The August jobs report underscored the slowdown. The U.S. economy added just 22,000 jobs in August, with declines seen in several areas linked to the LBM industry, including residential construction and logging. According to the National Association of Home Builders, housing starts dropped 8.5 percent in August to a seasonally adjusted annual rate of 1.31 million units, while the NAHB Housing Market Index for single-family homes held steady at 32, a level indicating that more builders view conditions as poor rather than good.
The Fed’s move is expected to ripple across the economy, especially through the residential construction sector. Today’s rate adjustment is expected to ease borrowing costs for builders and developers by reducing interest rates on construction loans, land acquisition financing, and other investments tied to residential construction. Mortgage rates are also beginning to soften, with the average 30-year fixed rate declining to roughly 6.35 percent, its lowest level in nearly a year. If sustained, lower mortgage rates could improve affordability and help revive homebuyer demand. The Federal Reserve is expected to meet several times prior to the end of the year where an additional quarter-point cut may be announced should macroeconomic conditions continue to stagnate.
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