Rate Watch

Rate Watch

Here Is What We Learned from Yesterday's Fed Meeting

As expected, the Fed raised policy rates by 0.25% at their February meeting. This is the smallest increase of the eight made in the last year.

More "importantly" Fed Chair Jerome Powell's press conference acknowledged that inflation has been coming down.

Jerome stated yesterday; "recent developments have been encouraging, but more work is needed to be done."  Think of it as a football coach giving a in game interview after the 3rd quarter saying that the game plan is working, the team is winning, but we have to stay the course for the 4th quarter before we can celebrate.

  • Inflation fell to 6.5% in December from a peak of 9.1% in June 2022

What to expect: We can expect a couple of more rate hikes, but not to the extent we've seen the past year. We have seen price of goods come down, but not the shelter prices. Seeing deflation in shelter cost is the key metric they will be keeping an eye on. The next fed meeting is March 22, and another 25 bp is expected again.

Disclosure: Mortgage rates are impacted by market forces beyond Fed actions and will not necessarily change at the same pace as the Fed's moves. They often shift before the Fed acts, in anticipation of their changes.

Background on the Fed:

  • The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks.
  • The rate was lowered to near zero in March 2020 in response to the pandemic. These historic measures are now being reversed.
  • This is the eighth increase since March 2022.

How does this news impact homebuyers: The bond market reacts to news of the Fed Meetings.  Inflation is an enemy to mortgage rates. Seeing inflation ease and positive news around inflation generally causes the bond market to react positively and leads mortgage rates to drop. 

Where are rates at now:  Believe it or not, today the average 30 year fixed rate mortgage in a Mortgage News Daily surveyed showed rates were at 5.99% !

Take a look: Mortgage News Daily - Mortgage And Real Estate News

Provided by James Gross of Franklin Loan Center

This could be the sweet window of time for home buyers to purchase without the market being too competitive. Buying now with negotiating power, and refinance down the road to a lower rate could be a great strategy for home buyers.

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