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The Federal Reserve May Not Increase Interest Rates Much More

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Fed shifts gears, may not push interest rates much higher

WASHINGTON – Nov. 29, 2018 – Federal Reserve Chairman Jerome Powell ignited a market rally yesterday by saying interest rates are "just below" broad estimates of a level considered neutral – a setting designed to neither speed nor slow economic growth.

Investors welcomed his remarks because they appeared to retreat from a comment he made in early October describing the Fed's benchmark rate as a "long way" from a neutral level. For some listeners, that statement implied that Powell planned to keep raising rates for a while.

However, his remarks Wednesday appeared to suggest to this audience that he might stop sooner or move more slowly.

Powell did not provide any more guidance on the likely path for rates, and he noted they remain low by historical standards. In addition, he offered nothing to dispel market expectations of another rate increase at the Fed's policy meeting on Dec. 18-19.

For homebuyers, the Fed's interest rate increases directly affect the rate charge on adjustable rate mortgages. The impact on fixed-rate mortgages is less reliable, but they also tend to go up generally as short-term rates increase.

A Fed slowdown in rate increases could bring some new stability to the mortgage market going forward.

Source: Wall Street Journal (11/29/18) Timiraos, Nick

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Information provided by Florida Realtors.  Click here to see the original article.

Reprinted with permission Florida Realtors. All rights reserved. 

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