The Fed does the expected, but what’s next?

Mid-March marked the first time that the Federal Reserve raised its rate in 2017. In bumping the rate up .25 percent, they noted that the economy is doing well and that we are approaching full employment. The bond market’s reaction to the move was surprisingly positive. We saw treasury and mortgage rates go down slightly that day, which is contrary to what we would have expected. Experts say that happened because the interest-rate increase was widely expected by the markets and it also signaled that the Fed is staying ahead of the inflation curve.

When Chairwoman Janet Yellen was asked why she had made the move earlier than anticipated, she simply replied that the “economy is doing well.” The Fed has stated that they anticipate raising rates three times this year. They now have two more opportunities later this year to normalize rates.

After this rate hike, average 30-year fixed rates were at 4.375 percent, 20-year fixed rates were at 4.250 percent and the 15-year fixed rates were at 3.5 percent.

I anticipate that 30-year fixed rates will remain under 5 percent through the end of 2017 and that they will go above 5 percent in 2018.

While these rates seem high compared to the mid 3’s that we enjoyed in mid-2016, they are still at historically low levels based upon the 8 to12 percent range that were around in the 1980s and 1990s.

To contact me, call 773-557-1000 ext. 15, e-mail ron@ronmortgage.com or visit http://www.ronmortgage.com.