The Federal Reserve has left little doubt that it will raise interest rates Wednesday (3.15.2017) for the third time since December 2015 to reflect a consistently solid U.S economy. The rate increase will likely go down as one of the most telegraphed ever, given that several Fed officials, including Chair Janet Yellen, each let it be known over the past two weeks that they felt it was time to raise the Fed’s benchmark short-term rate.
The thinking was that the Fed would want to see whether President Donald Trump’s ambitious economic program of tax cuts, deregulation and higher spending on the military and infrastructure could pass Congress — and then assess how it might affect the economy.
Now, the guessing switches to how many times the Fed may raise rates during 2017 — whether three times, as the market now expects, or perhaps as many as four.
Yet regardless of the answer, the market seems far less nervous about the prospect of rate increases than it was in recent years. Investors seem increasingly confident that the U.S. economy is vigorous enough to withstand modestly higher borrowing rates.
Fed projections and dot plots
The Fed’s expectations for GDP growth increased slightly to 2.1% in 2018, while forecasts for unemployment remained mostly the same, with officials expecting the rate to fall to 4.5% by 2019. Officials raised their short-term outlook for core PCE inflation to 1.9% this year.
While projections for the federal funds rate rose across the board, the total number of expected rate hikes in 2017 remained unchanged with three quarter-point raises. In December, Fed officials raised their forecasts for the pace of rate hikes after the election of Donald Trump, which sent inflation expectations surging.
Officials also forecast three rate hikes in 2018, with the rate reaching its long-run goal of 3.0% in 2019.An increased number of Fed officials are expecting to raise rates at least twice more this year. Only three of the 17 officials who submitted forecasts now expect the central bank to move more slowly. There was a similar coalescing around tighter policy for the following two years, although the median prediction of a 3 percent funds rate by the end of 2019 remained unchanged. The rate hike will increase the upward pressure on interest rates that consumers pay, but the immediate effect is likely to be modest. People with credit card debt are likely to see an immediate increase of about a quarter percentage point in their interest rates. The effect on longer-term loans is less direct, but the average rate on a 30-year mortgage rose by half a percentage point over the last year. The Fed has concluded that the economy is growing at something close to its maximum sustainable pace.
“That Fed move is already built in to rates” for other products (like mortgages), added Barnes — which seems to be the consensus from other experts, too.
The Federal Reserve sets the rate for the overnight exchange of money by banks; governors adjust the rate to help curb inflation or stimulate growth, depending on their assessment of what would be best for the economy.Lsm-Heels Women's Retro Flat Bottom Leisure Shoes B07GLPZG3H ParentWynsors Gina Older Girls School Shoes Black - Black - UK Sizes 3-8 B07FW7N5Q1 Parent , Hattie Women's Slip On Loafers Walking Shoes Ladies Comfort Suede Leather Moccasins B07GQXM5X2 Parent , Womens The North Face Base Camp Mini Slip On Beach Sandals Flip Flops B00WIGYQDG Parent , Ladies summer flip flops, stylish heel slippers, plain beach sandals, plain outer wear B07449S14W ParentSCLOTHS women's flip flop slippers Non-slip High heel Bow tie Outer wear Thick bottom B07C9MSWXJ Parentweiwei Ladies Summer Flat Bottom Cool Slippers,Fashion Flowers Lined Slippers B07CLLM225 Parent@Sandals Slope And Slippers Summer Korean Version Of New High Heels, Flip Flops, Beach Feet, Women'S Dragging. B07DQTT7Z2 Parent , SCLOTHS summer women's flip flop slippers stripe Pointed Baotou Fine with Breathable B07FFVWHLQ ParentFangYOU1314 Wild Rhinestone Simple Beach Flat With Toe Female Sandals And Slippers (Color : Gold, Size : 5 UK) B07GKXC5QL Parent , sumi flip flops toe post B00WKNAFUA ParentFrestepvie Woman Sandals Espadrilles Girl Printed Embroidered Dots Clogs Mules Slipper Shoes Summer B07DCSBGJY ParentFrestepvie Women's Summer Beach Sandals Flip Flops Stretchy T-Bar Strappy Slipper Thong Soft Flat Non-Slip Slingback... B07FRGC9JZ Parent , SHANGXIAN Summer Beach Flip Flop Pool Shoes Women's Lightweight Slipper, a, 35 B07CCM8PY3 Parent , LIXIONG Portable woman summer Cool slipper Fashion casual rhinestones Toe flat bottom half drag, 3 colors Fashion... B07CY1NW7F ParentAa-nvliangxie Women'S Shoes In Summer,New Style Rough Diamond With Diamond Toe Toe Fashion Korean Version T Clasp... B07DGW3TZ9 Parent , DROVE Beach Holiday Sandals Fashion Wear T Shaped slipper Women Slipsole Flat Shoes Flip Flops B07DGWSMFR Parent , YXLONG Spring And Autumn Women's Shoes New Fine With European And American Sexy Sequins High Heels B07G79FZM7 Parent , Flip Flops HUYP Couple Men And Women Models Ladies Summer Men's Beach Shoes (Size : 44) B07GND8253 Parent , Calvin Klein Jeans Women’s Tamber Jelly Toe Separators B01NABE3HW Parent , Sanagens Ciabatta Infradito Made in Italy White Masai 72 Art. 1312 (TG 38) B07CQ4DH7B Parent , FangYOU1314 The First Layer Of Leather Fish Mouth Thick With Leather T (Color : Black, Size : 6 UK) B07G4DBD18 Parent , Funtasma by Pleaser Men's Halloween Renaissance , Size: X-Large,Color: Brown B001AH8AQI Parent , Centek FS86 S1 Safety Shoes Work Shoes Business Shoes Hiking Boots Flat Shoes Black B077GV2235 Parent , Men's British Style Thick Bottom Flexible Tassel Brogue Shoes for Walking, Home Living, and Company B07H34FRN8 ParentFine with high heels girl tip water drill to tie in with the black cat track shoes wedding shoes bridal shoes,... B07CCN5HGF ParentKs 15107 Mens Official Smart Leather Shoes Black B077H21WL7 ParentMens 5 Eyelet Plain Oxford Tie Shoes with Leather Lining B00MNFCM88 Parent , Men Sets of Feet Business Casual Leather Wearable B07GP4282V ParentSamuel Windsor Men's Handmade Black Patent Italian Leather Formal Dress Shoe (5, Oxford Black) B01L9H2PEQ Parent ,
Although this rate is not the same thing as the mortgage interest rate that buyers pay when they take out on a loan on a home, movement of the Fed rate up or down can put pressure on mortgage interest rates.
“With this increase well anticipated by most markets, Keller Williams does not expect any dramatic change in the current path of mortgage rates. Rates will likely continue to slowly rise this year barring a change in the economic situation,” said Ruben Gonzalez, staff economist, Keller Williams, in a statement.
“While higher mortgage rates will likely have some downward impact on demand, housing remains very affordable by historic standards and we anticipate another year of healthy home sales despite an environment of increasing mortgage rates,” added Gonzalez.Mortgage rates don’t usually rise in tandem with the Fed’s increases. Sometimes, they even move in the opposite direction. That rate increase suggests that markets have already priced in Wednesday’s rate hike and that mortgages might not respond immediately to the Fed’s announcement. Unless and until, that is, the Fed signals that it plans to raise rates even faster than anyone expects.
Sources for this article:Fed Raises Interest Rates for Third Time Since Financial Crisis