The Fed Raised Rates. Don’t Expect the Same for Your Bank Deposits
A rate rise at the end of the Federal Reserve’s two-day policy meeting on Wednesday is all but a foregone conclusion on Wall Street – now traders want to know whether the central bank sees more than a total of three increases this year.
“Yes, many existing homeowners will have a financial disincentive to sell because they would lose their lower than prevailing mortgage rates in doing so, the so-called rate lock-in effect”, Fleming said.
The Fed doesn’t directly set mortgage rates, but its actions can affect the housing market.
Looking forward, financial markets will be closely watching the USA for signs of inflation rising under the Trump administration.
Plus, rates are still relatively low, and many experts don’t expect them to rise above 5% this year. We have found that except for Minneapolis Fed President Neel Kashkari, all the other members are hawkish heading to the rate decision. The US rate hike would increase pressure on Seoul to follow suit to head off capital outflows.
Faced with a much improved job market and prices that are moving slightly higher, the Fed is saying that it make sense to raise interest rates a bit. Investors who were once terrified that the Fed might pull back on monetary stimulus now see the rate hikes as signalingconfidence in the economy.
But Wednesday’s hike was widely expected, meaning the markets had already priced it in. What’s more, United States president Donald Trump says 3-4% annual GDP growth is achievable, and he’s willing to cut taxes, slash regulation, and increase fiscal spending to get there. It continues to forecast an unemployment rate remaining at 4.5 percent and inflation at around 2 percent for the next two years.
The Fed’s statement signaled the central bank was more confident about inflation, noting that “inflation has increased in recent quarters”.
He says: “We believe further rate hikes are on the way – and at a faster clip than the market expects”. Federal student loan rates are locked in.
And the fact is, the economy was losing steam going into this year, before Donald Trump stepped into the Oval Office. Investors may start to fret about how steadily higher Fed rates will raise the cost of borrowing and slow spending by consumers and businesses.
The Fed said its inflation target was “symmetric”, indicating that after a decade of below-target inflation it could tolerate a quicker pace of price rises.
Economist Andrew Charlton from AlphaBeta told Radio National this morning that the level of the rate increase and the Fed’s outlook for the year fell short of what some market watchers had expected.