FED Leaves Interest Rates Alone

FED Leaves Interest Rates Alone

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FED Leaves Interest Rates Alone

Realty Biz News reports the FED leaves interest rates alone for now. Jerome Powell, chairman of the Fed, said the organization was taking a “patient” approach to rate increases, following four hikes in the interest rate last year.

The Fed’s benchmark rate isn’t tied directly to mortgage rates, but the 10-year treasury  ends up influencing them.

Due to the Fed’s more cautious tone, Freddie Mac says it’s revising its own mortgage rate forecast to a lower average through 2019.

The 30-year fixed rate mortgage climbed for several months during 2018 but has now begun to let up. In 2018 it averaged 4.6 percent, before falling to a nine-month low at just 4.45 percent in early January.

Now, Freddie Mac’s Economic Research Group says the 30-year fixed mortgage rate will average at around 4.7 percent this year and 4.9 percent in 2020. What this means is that we can expect moderation in mortgage rates that will offer some relief to the housing market, which is showing signs of slowing down.

“Home buyers are very sensitive to changing interest rates and will likely respond positively if mortgage rates remain below 5 percent,” said Sam Khater, Freddie Mac’s chief economist.

The Fed’s rate hike in December was its ninth quarter-point increase in the past three years since the Fed began to gradually raise rates from record lows in December 2014. After Wednesday’s meeting, the Fed will keep its key short-term rate in a range of 2.25 percent to 2.5 percent.

“In light of global economic and financial developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate,” a statement from the Federal Reserve said.

The Fed also said that economic activity has been “rising at a solid rate” and it does expect continued growth, but noted several political uncertainties—such as fallout from the government shutdown—and a slowdown in foreign economies as a reason for a more cautionary approach.

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