Reasoning
Current 30 year mortgage rates sit near 6.9 percent with the federal funds target range at 3.50 to 3.75 percent and the June 2026 SEP median projecting a year end 2026 funds rate of 3.8 percent. The new Kevin Warsh led FOMC has held rates and removed its easing bias, yet the nine of eighteen SEP participants projecting a higher year end rate still leaves a 1.8 percentage point gap to the 5.5 percent funds rate needed to push mortgage rates above 7.5 percent. Historical episodes show that sustained 7.5 percent mortgage rates require at least two consecutive 50 basis point hikes or a 100 basis point cumulative tightening, neither of which is embedded in the current dot plot.Key uncertainty
Whether the next two CPI prints show inflation reaccelerating above 3.0 percent year over year, which could force the FOMC into a July or September hike cycle.