The Federal Reserve met this week to discuss monetary policy and there was a vote to see if they should raise interest rates. They voted not to raise rates, but the vote was not unanimous, it was a 7-3 vote to leave rates alone. It's been a long time since there were three that voted to increase rates, which means we could see a rate increase later this year.
In its post-meeting press statement, the Federal Reserve said that the U.S economy is expanding at a "moderate pace", and inflation rates have "continued to run" below the Fed's target range of 2% over the long term. Right now the Fed wants to see if further progress is made towards it's goals before they raise rates again. The Fed's future moves will depend on where the labor market goes and the rate of inflation.
There is job growth, the economy has created about 15 million new jobs since 2010, but wages are lower than the Fed would like to see. The inflation rate has also been lower than the Fed would like to see – partly due to the wages. When inflation stays low too long, it can lead to deflation which can be more damaging to the economy than inflation. The Fed did make comments about some deflationary threats to the economy, mostly regarding energy and commodity costs. They believe those will subside but are not sure how soon.
The bottom line is to expect that if the economy continues to improve, the Fed will raise rates in the near future, possibly before the end of 2016 – which is coming soon! We know the Fed wants to raise rates, but they are concerned about the economy so are holding off for now. That means if you are thinking about refinancing, you should lock in soon. If you are thinking about buying, you may want to look sooner than later!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, AnEqual Housing Lender, NMLS#150953 - Email - Website
