Interest Rates See a Small Bump After Recent Lows

March 7, 2025 | Industry News

After hitting their lowest point in months, interest rates crept up slightly this past week. While the increase wasn’t huge, it’s worth understanding why it happened and what could be next. Global events, government spending, and economic data are all playing a role in this shift. Let’s break it down.

Tariff Uncertainty Shakes Markets

Markets have been on edge with ongoing uncertainty around tariffs — taxes placed on imported goods. Headlines have been changing daily, making it hard for traders to predict outcomes. This uncertainty affects inflation, and inflation impacts interest rates. If tariffs drive up costs, rates could rise. Until there's clarity on the tariff situation, expect volatility.

Germany’s Big Spending Plan

In Europe, Germany recently announced plans to spend large amounts of money on defense and infrastructure. To fund this, they may issue more government bonds, which can lower the value of existing bonds. As a result, bond yields rise, and when that happens, interest rates often follow. This sudden shift in Germany caused a ripple effect, pushing rates higher worldwide — including here in the U.S.

Slower Job Growth in the U.S.

Closer to home, the latest employment report showed slower job growth than expected. Only 77,000 private-sector jobs were added last month, falling short of the 150,000 anticipated. While unemployment remains low, a sluggish job market could push the Federal Reserve to consider cutting rates later this year to keep the economy strong.

What’s Next for Interest Rates?

The market now expects the Fed to cut rates three times in 2025, with the first cut likely in June. However, this prediction could change if economic data or global events shift. For now, the Fed is balancing controlling inflation while keeping the economy steady.

Mortgage Rates Update

As of March 6, 2025, the average 30-year fixed mortgage rate was 6.63%, down slightly from 6.76% the previous week. However, with all the market uncertainty, rates may continue to fluctuate.

Key Events to Watch Next Week

1. Consumer Price Index (CPI): This major inflation report could influence future rate cuts.
2. JOLTS Report: Tracks job openings and hiring trends, giving insight into the labor market.
3. Tariff and Global News: Any major announcements about tariffs or international spending could impact rates.

Keep an eye on these factors as they’ll help shape where mortgage rates go from here. We’ll keep you updated as things unfold!