The Federal Reserve’s Federal Open Market Committee (FOMC) voted to cut interest rates again on Wednesday, December 18, by lowering the target range for the federal funds rate by 1/4 percentage point (25 bps) to the 4 1/4 to 4 1/2 percent range.

The Fed doesn't directly set mortgage rates, but it influences them by making changes to the federal funds rate, the interest rate that banks charge one another for short-term loans. The Fed's decisions alter the price of credit, which has a domino effect on mortgage rates and the broader housing market over the long term.

The Federal Reserve just cut interest rates, but don't get used to falling borrowing costs: they're likely to stay where they are for at least the next couple of months.