September 25, 2018
Let us assume that the prognosticators are correct, and the Federal Reserve Board will hike short-term rates by one-quarter of one percent when they finish their two-day meeting tomorrow. What questions does that leave us with? For one, will the Fed’s announcement also give us a hint about whether there will be a fourth rate increase next year? Secondly, what kind of surprise could the Fed have in store?
Surprises could consist of the Fed not hiking rates or moving rates by one-half of one percent instead. There is no way to predict how the markets would react to either surprise and these hypotheticals are not likely if you believe most market analysts. How would the markets react to the expected increase? Typically, we see long-term rates moving up several days or a few weeks before the meeting. That has already happened. Then rates move down a bit as the meeting approaches or right after the announcement. Markets often move in anticipation of an event.
Where do we go from here? The Fed’s announcement may or may not give us a clue. Thus far we have had no indication that the Fed feels that we are close to neutral range with regard to short-term rates. The economic news from now and November or December will give the Fed enough clues as to whether to act again or hold off. Next week we have another jobs report and that data will be an important factor the Fed considers. Other than the real estate market, most areas of the economy continue to be moderately strong.
Source: Origination Pro
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Philip Loria founded AMERIMUTUAL Mortgage in 2007, and has served as its Chief Executive Officer since its formation. He is the guiding force behind AMERIMUTUAL’S growth and success, and has set standards nationally for expertise, vision and reputation in Residential and Commercial real estate finance. Philip Loria’s stature has been consistently recognized by local and national media, including: Publications by the New York Times & The Real Deal New York’s Real Estate News.
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