Interest Rates Dodge Another Close Call

DAILY REAL ESTATE NEWS | THURSDAY, MAY 04, 2017

The Federal Reserve voted Wednesday to leave its benchmark interest rate alone, citing signs of a slowing economy between the January-to-March quarter. The benchmark rate will stay low, near 1 percent. However, the Fed cautions that it expects that a strengthening economy and job market in the coming months will justify a higher rate later this year.

Read moreRising Rates, Rising Sales

Mortgage rates aren’t directly tied to the Fed’s benchmark rate but are often influenced by them.

The Fed’s pause to raising rates at Wednesday’s meeting comes after it increased its benchmark short-term rate in December and March. Many economists predict that the Fed will raise rates at its next meeting in mid-June.

“Today’s FOMC decision is only a short-term, temporary pause,” says Lawrence Yun, the chief economist for the National Association of REALTORS®. “With no change in monetary policy, mortgage rates look to remain within the narrow band of 4 percent to 4.5 percent for the foreseeable future. However, the future path of rate hikes and changes in bond purchase levels will depend upon inflationary pressures. Without adequate increases in new housing production, both rents and home prices will accelerate, and therefore complicate the Fed’s desire for full employment and price stability.”

Source: “Fed Leaves Rates Unchanged But Signals Further Hikes Ahead,” ABC News (May 3, 2017)