T
he Federal Reserve's next interest rate decision may be influenced by growing concerns about the labor market and inflation. As economic data releases settle, clarity is emerging on the state of the housing market. Key takeaways from recent announcements include: The jobs report revealed a deteriorating labor market, with downward revisions for May and June and lower-than-expected job growth in July. This could impact short-term interest rates and mortgage rates in the coming weeks. Mortgage rates have already responded to this news, dropping to 6.57% on August 4, the lowest level since early October 2024.

    This rate decrease provides an opportunity for house hunters to lock in a deal before summer ends, according to Redfin's chief economist Daryl Fairweather. Compared to May, the current drop has added around $20,000 in purchasing power for those with a $3,000 monthly budget. However, inflation remains a concern, with core prices up 2.8% year-over-year in June, above the Fed's 2% goal.

    The impact of tariffs on consumer prices is still uncertain, with many countries facing higher rates and ongoing negotiations between the US and its trade partners. Fitch Ratings estimates the effective U.S. tariff rate at its highest level in decades at 17%. This may deter the Fed from lowering borrowing rates and keep consumers cautious about large purchases like a 30-year mortgage, suppressing homebuying activity.