The updated "dot plot" reflected a more cautious outlook, projecting just one additional cut in 2026 and another in 2027, with the longer-run rate settling around 3%. Inflation remains somewhat elevated and is expected to stay above the 2% target until 2028, while growth projections were slightly upgraded.
The labor market was a key focus during the meeting and Powell's press conference. The Fed noted that job gains have slowed, the unemployment rate has edged higher (projected to be around 4.4%–4.5% in 2026), and conditions have softened, creating tension with the dual mandate of price stability and maximum employment. Powell emphasized that the market remains in good condition overall—layoffs and hiring are low—but acknowledged further risks and a normalizing environment after years of tightness.
Throughout 2025, BLS job reports have shown significant volatility, with initial estimates often revised downward substantially. For instance, earlier reports underwent substantial revisions, sometimes erasing hundreds of thousands of initially reported jobs due to factors such as survey response challenges and benchmark adjustments.
This pattern has added uncertainty: headline numbers can appear strong initially, but revisions indicate slower growth and cooling conditions. Powell and the Fed look beyond monthly headlines to a broader set of indicators, which support a resilient yet softening labor market.
For homebuyers and homeowners, this matters deeply—a stable job market bolsters confidence and borrowing power, but ongoing softening could influence future Fed actions and mortgage rates.
The Fed's actions don't directly set mortgage rates, but they significantly influence them. Post-meeting, 30-year fixed rates have hovered around the low-to-mid 6% range—improved from earlier highs but reflecting the more restrained cutting path ahead.
For my in-depth analysis of the December meeting—including labor market trends, BLS revisions, and what it all means for 2026 rates—tune into the latest episode of my podcast, Mosaic: The Stories of Real Estate.
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Mike Nelson Owner, Efficient Lending, Inc.
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720.419.3016 or mike@efficientlending.net
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