Mortgage applications in the US decreased by 1.2% for the week ending 21 February 2025, compared to a decline of 6.6% the previous week.

This reduction is primarily attributed to a drop in refinancing activity, indicating a shift back to a quieter housing market after a brief increase at the year’s start.

Meanwhile, purchase applications saw only a modest change, suggesting that homebuyers are not rushing into the market despite lower refinancing numbers. The shift follows a period of increased activity during early January, when falling mortgage rates briefly encouraged more homeowners to refinance. Now, with rates stabilising and fewer borrowers seeing financial benefits from refinancing, demand has eased.

Recent remarks from Jerome indicate that policymakers remain focused on long-term stability rather than short-term market reactions. While no immediate adjustments to monetary policy were outlined, his tone reinforced expectations that interest rates will not see abrupt changes. This aligns with previous comments from other Federal Reserve officials, who have repeatedly pointed to a data-driven approach.

Labour market reports continue to show resilience, reducing the likelihood of any sudden rate cuts. Wage growth remains steady, and unemployment figures have not deviated much from expectations. If job numbers continue on this trajectory, the central bank has little reason to adjust its stance in the coming weeks. Inflation data also suggest that price pressures are easing gradually, giving policymakers room to observe before making any moves.

Further insight came from Lael, who emphasised the importance of keeping inflation on a controlled path over the coming months. Her statement reinforced the message that while progress has been made, officials want to ensure price stability before considering rate reductions. Market participants should recognise that this approach will likely lead to continued rate steadiness unless fresh data shifts the outlook.

The bond market reacted with muted movement following these comments, showing that expectations for policy adjustments remain largely unchanged. Treasury yields have held within a narrow range, reflecting a calm response from traders who see little chance of unexpected shifts in the near term. Equity markets also displayed minimal reaction, as investors had already priced in a steady policy approach.

Looking ahead, the focus stays on upcoming inflation figures and employment reports. Any surprises in these areas could prompt markets to adjust their projections, but current indications suggest a steady path forward.