Long Island mortgage rates hit 7.4% ahead of Fed meeting

The average 30-year mortgage rate reached a three-year high of 7.4 percent earlier this month, a figure that has pushed home buying out of reach for another five million households according to Oxford Economics. The rate slipped to 7.32 percent last week but remains far above the 6.2 percent level recorded a year ago. These elevated costs have become a central concern for voters in Long Island and across the nation as midterm elections approach in six days.

Federal Reserve policymakers are scheduled to finish their October 27-28 meeting Wednesday. Investors and economists expect the central bank to keep its key interest rate unchanged at approximately 3.9 percent. This will be the fourth meeting under Chairman Kevin Warsh, who was appointed by President Donald Trump earlier this year. The timing of the decision has drawn attention because it occurs just before the election, which has been shaped by affordability issues including soaring gas prices and high grocery costs.

Market futures indicate almost no chance of a rate increase this week. Philip Jefferson, vice chair of the Fed's board of governors, stated that he and his colleagues would need to reach their own judgment, a process that might take more time. Joseph LaVorgna, chief economist at SMBC Americas, suggested the Fed would hold back to avoid complicating the White House's position six days before the election. LaVorgna noted, "The Fed doesn't want to poke the White House in the eye six days before an election."

Questions persist regarding Chairman Warsh's independence from the administration. In September, Warsh voted to raise rates despite Trump's preference for cuts, a move that assuaged some market concerns. James Knightley, chief international economist at ING, said the markets have been encouraged by Warsh's actions so far. However, Trump has renewed efforts to fire Fed governor Lisa Cook, and he recently told reporters he called Warsh before the September meeting. Warsh declined to comment on those communications at his last news conference, leaving a question mark on the chairman's autonomy according to Derek Tang of Monetary Policy Analytics.

Inflation data has come in hotter than expected for two consecutive months. Diesel fuel reached an all-time high of $6.53 in late September and has only fallen to $6.35 since then. These shipping costs may be passed on to consumers, spreading inflation to more parts of the economy. Aditya Bhave, head of U.S. economics research at Bank of America, noted that inflation has not met the Fed's 2 percent target for a single calendar quarter since late 2020.

Economists are watching for signs of dissent within the Fed's rate-setting committee. The September decision was unanimous, but analysts expect two or three dissents this week. Beth Hammack of the Cleveland Fed and Lorie Logan of the Dallas Fed are considered most likely to vote for a rate hike. Both officials have expressed concern that the current rate is not high enough to cool the economy. A vote to raise rates in December could become more likely if Warsh reiterates that the Fed intends to return inflation to its target in a timelier fashion.