The S&P 500 Index suffered its worst day since early 2020 on Thursday, while recession fears gathered pace amid a bloodbath across markets including the Dow and Nasdaq, both of which nosedived yesterday.
The Fed left rates unchanged in its last announcement on March 19, keeping its benchmark rate at a range of 4.25% to 4.50%, with chair Jerome Powell emphasizing that the central bank was weighing up the likely impact of Trump’s policies before making a move.
Its so-called “dot plot”, which maps decisionmakers’ expectations on the direction of interest rates, suggested just two cuts were likely in 2025. But markets now believe the Fed will be forced to trim rates more than originally planned as an economic downturn potentially looms.
That leaves an unclear outlook for the mortgage market. Ten-year yields fell below 4% on Friday morning, hitting their lowest level since early January and dipping to 3.95%.
Trump welcomed that slide on Thursday, but wider economic uncertainty – and the prospect of a spike in consumer prices and unemployment in the event of a damaging trade war – could weigh against homebuying activity.