Archive for June, 2018

Feds raising rates again?

June 12, 2018

This week the Federal Reserve meets again with the prospects of another hike in the Federal Funds Rate. While there seems to be positive sentiment for an increase, the excitement for an increase is lower than it was a few weeks ago. There are concerns in the markets with events overseas, increased prices in oil, and a sluggish first quarter of economic growth in the US.

If the Fed raises rates, it would be the seventh increase within the past 30 months. That said, rates would still be well below where they were at the start of the recession. Whether they raise rates or not, analysts will be watching carefully for the Fed’s statement which will be released on Wednesday along with the rate decision. This statement may give us a clue of what the Fed is thinking about rate increases for the rest of the year and perhaps even into next year. A major question to answer will be at what level will they consider rates “normalized.”

In terms of mortgage rates, the last several times the Feds have raised the Federal Funds Rate, mortgage rates have either improved or at least stayed the same. Why? The higher the Federal Funds Rate, the more inflation is kept in check. Since mortgage rates hate inflation, this can help push mortgage rates down. Considering mortgage rates have increased by 0.750% this year, any relief would be welcomed. So don’t worry about hearing the Feds are raising rates because that may actually help mortgage rates improve.

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