What the Fed Could Do Next—and Why It Might Not Lower Your Mortgage Rate

As the Federal Reserve gears up for its next policy meeting, investors, businesses, and consumers alike are bracing for clues on the direction of interest rates. To help decode what may lie ahead, AInvest’s Adam Shapiro sat down with Brad Case, PhD, CFA, CAIA—Chief Economist at Middleburg Communities. Case is widely regarded as an expert on the Fed, bringing deep academic credentials and decades of applied experience in real estate economics, investment strategy, and macroeconomic forecasting.

WATCH: Will the Fed finally blink?

At Middleburg Communities—a full-service firm that develops, builds, and manages rental housing across the Mid-Atlantic and Southeast—Case's job is to distill complex economic signals into strategic decisions. With his blend of academic rigor and practical insight, he offered a grounded and clear-eyed preview of what to expect from the upcoming FOMC meeting—and what it could mean for Main Street.

Case believes the key question heading into the meeting is straightforward: “I think what's on top of mind for most people is whether the Federal Reserve or the FOMC is going to continue lowering interest rates.” While markets are pricing in a potential cut before year-end, Case is skeptical about a move at the upcoming meeting. “Even if the FOMC were to cut rates at the next meeting, which I don’t think they will do, that doesn’t mean that mortgage interest rates will drop,” he explained.

That’s because, as Case noted, the Fed has tools beyond short-term rate adjustments. He pointed to the importance of balance sheet policy—specifically, quantitative tightening. “Sometimes they don’t even have to change their policy interest rate to affect mortgage interest rates,” he said. “They have very much been doing something that does affect mortgage interest rates,” Case added, referring to the Fed’s ongoing effort to let assets fall off its balance sheet.

Asked how Fed decisions affect everyday people, Case was direct: “There really is a very strong reaction to what the FOMC does.” While the Fed’s actions may seem distant from Main Street, the ripple effects—especially on mortgage rates—are real and impactful. He emphasized that it’s not just the headlines investors should watch: “In order to answer the question, what’s going to happen to mortgage rates, you really have to look more deeply into the announcement that the FOMC publishes following the meeting.”

Political pressure on the Fed has also emerged as a theme, particularly following comments by former President Trump suggesting he would replace Chair Jerome Powell. Case dismissed the notion that politics could steer monetary policy. “It has actually been quite impressive to me how Jay Powell has managed to protect the independence of the decision making process at the FOMC,” Case said. “Even if the chairman were apt to buckle to that kind of pressure, it would be difficult for the chair to get that kind of buy-in from other members of the FOMC.”

The conversation turned to speculation about Powell’s potential successor, including names like Kevin Warsh. Case acknowledged the behind-the-scenes maneuvering but downplayed the significance. “I think there are a lot of people who are in some sense running to be the next chair of the Fed. That’s always true,” he said. Still, he argued the institution tends to shape the individual: “They really do change their approach once they become someone in charge of very significant macroeconomic policy.”

On the economy more broadly, Case struck a decidedly upbeat tone. “There has been plenty of reason to be concerned that we might move into a situation of weaker economic growth or higher inflation or both. And yet we haven’t seen that,” he said. “What we’ve seen is that consumers and businesses have been very, very resilient.”

That resilience is mirrored in his own business outlook. Middleburg Communities, which specializes in building and managing rental housing, continues to see strong underlying demand. “We don’t depend on lower interest rates to do what we do. If we did, we would be pretty lousy developers,” Case noted with a chuckle. The real driver, he said, is household formation. “That comes from young people forming their own households… That has been happening very strongly for more than a decade and I’m very optimistic that that will continue.”

Still, Case did express some caution—particularly when it comes to Washington. “The things that have been uncertain about federal economic policy since January still are concerning,” he said. While he’s encouraged that “the federal government really hasn’t been following through on some of the worst ideas,” he warned, “what brings a frown to my face is the idea that that might start happening.”

In sum, Case expects the Fed to remain cautious in the near term, with potential rate cuts later in the year only if conditions allow—not because of a looming downturn. “There really is essentially no hard evidence that suggests this economy is moving toward recession,” he said. If a cut comes, it’ll be because the Fed believes “rates should be a little bit below where they are now and they feel they have room to go ahead and make that move.”

For markets—and for Main Street—his advice is simple: Don’t just watch the Fed’s rate decision. Read the full statement. The fine print may have more impact on your mortgage than the headline rate ever will.