Rates are still “movin’ on up”

The Fed raised rates a quarter point in March bringing the prime rate up to 4.75 percent.

Fed Chairman Jerome Powell stated that the economy is doing well and that the increase is in line with the Fed expectations. The Fed has stated that they are expecting to increase rates a total of three times this year, at .25 percent each time, and two times in 2019.

The unemployment rate in March ticked up to 4.1 percent from 4.0 percent, which is still historically low. Meanwhile, wage inflation remained tame, allowing the Fed to stay the course with its projected rate hikes.

The Fed felt very comfortable with where wages were, noting that the last time unemployment was around 4 percent was 2000. Adjust for inflation, wages were much higher then, which means unemployment can fall even lower before the Fed has to worry about inflation.

Mortgage rates had widely anticipated the increase, so there wasn’t much reaction when the Fed made the move. In April, rates fell to a two-month low, with the 30-year fixed at 4.5 percent and the 15-year fixed at 4 percent. Those rates have been influenced by the Trump administration’s implementation of trade tariffs, mostly against China.

The current view is that rates will stay in a narrow range for the next quarter, but we do feel that mortgage rates with continue to move up as the year goes on and into 2019.

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