Fed Hikes Rates Again

Jun 13, 2018

What is the biggest fear to agitate the mortgage industry? According to a new survey by Genworth Mortgage Insurance, it is the prospect of rising interest rates

For the second time in three months, the Federal Reserve has announced a rate hike.

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent,” said the central bank’s policymaking Federal Open Market Committee (FOMC) in a statement. “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to two percent inflation.”

The Committee’s unanimous vote marked the Fed’s second rate hike since Jerome Powell became the central bank’s chairman. As with the earlier hike, the Fed made no mention of the housing market in its decision. However, it did state that its future decision would be partially based on “readings on financial and international developments,” which might be seen as a not-subtle hint regarding the tariff policies being pushed by the Trump Administration and the pushback from the nation’s trading partners.

“One thing to point out is that there are a lot fewer consumers today whose debt is tied to short-term rates, and because the majority of consumer debt is from mortgages, this means the recent short-term rate hikes will be less impactful than what was seen in the mid-2000s,” said Freddie Mac Chief Economist Sam Khater.

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Phil Hall

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Jun 13, 2018

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