The Fed met this week and released their statement Wednesday. They left interest rates alone but did make some comments that affected interest rates.
In March, the Fed said they didn’t expect any interest rates increases until at least 2024. This week, they changed that and said interest rate increases could come as soon as 2023, some of the members expect to see two interest rate hikes in 2023.
The Fed also raised it’s headline inflation expectation to 3.4%, a full percentage point higher than the March projection. They did continue to say that the inflation pressures are transitory.
None of this was what the market expected. The Fed was expected to let interest rates stay where they are for a couple more years – as soon as this was released interest rates jumped and the stock market dropped. Fed Chairman Powell did confirm in a post meeting press conference that the board did talk about the next steps in tapering the Fed’s bond buying programs. These programs affect mortgage interest rates a lot. By the time he made that announcement, the damage was done as the markets assumed the Fed officials discussed slowing the purchase of bonds.
In the bigger picture, this is a token adjustment – last week the bond market was very strong. It remains to be seen whether today is the beginning of a trend towards higher rates or not – we won’t know that answer until we see how the markets react over the next few days. Many think it will be this fall before the Fed has enough information about the economy to make bigger decisions.
So if you are looking at buying or refinancing, know that the bond market may be a bit jumpy for the next few days. The market could continue increasing or maybe it’s a short term reaction. We won’t know until we see what happens over the next week. Know that rates are still good – but maybe a bit higher than they were a week or so ago!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website