ibusinesslines.com March 23, 2017

Fed Interest Rate Hike 'Not Likely to End this Bull Market'

21 March 2017, 01:47 | Kelvin Horton

Fed Rate Hike Could Squeeze Big Borrowers

US dollar firm on Fed outlook

This might seem daunting, at first, but NerdWallet mortgage analyst Tim Manni confides: "For consumers now shopping for a mortgage to purchase a property or refinance an existing loan, shouldn't feel like a real shock to the system since the rate move has already been "baked" into the market".

Last week, thirty-year fixed mortgage rates hit a high for the year, already, when the averaged shot up to 4.21%, in anticipation of this very move by the FED.

"In view of realized and expected labor market conditions and inflation", the Fed made a decision to raise the target range for the federal funds rate by 25 basis points to 0.75-1.0 percent, the Fed's policy-making committee said in a statement released after its two-day meeting. "Even economists who, of all people, should know better".

Market watchers also pay close attention to the Fed's dot plot projections that show where each of the sixteen voting members think the Fed's policy rate will be headed in the coming years. Note the key phrases in the following statement (emphasis mine): "The Committee expects that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term".

This means, though, that consumers who have credit card card or adjustable-rate mortgages or home equity lines of credit are those who will be most likely hit by the rate hike.

In a piece for HousingWire, he writes that the Fed's actions might actually be good for the housing market.

Also, he says, lending standards should loosen and mortgage rates will only moderately increase. The Bank of Canada (BoC) wants the Loonie to weaken against the Greenback in order to provide a boost to our beleaguered export sector, so the falling Greenback should make the BoC incrementally more dovish in its own right.

"I dissented because the key data I look at to assess how close we are to meeting our dual mandate goals haven't changed much at all since our prior meeting", said Kashkari.

The FOMC had previously raised the federal funds target rate to a range of 0.5 to 0.75 percent last December.

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