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Fed minutes reveal December rate hike wasn’t guaranteed

Hike was a close call

question mark

While the Federal Reserve made a unanimous decision to raise interest rates in December for the first time in nine years, there were some concerns expressed by members about the future of the economy, according to an article in the Wall Street Journal covering the latest minutes from the Federal Open Market Committee.

From the article:

“Because of their significant concern about still-low readings on actual inflation and the uncertainty and risks present in the inflation outlook, [officials] agreed to indicate that the [Fed] would carefully monitor actual and expected progress toward its inflation goal,” the Fed said in minutes of its Dec. 15-16 policy meeting released Wednesday.

Some officials said they wanted to see confirmation that inflation was actually rising as they looked forward to additional rate increases in 2016, the minutes said. Some also said it was a “close call” as to whether they should move in December.

So far, the housing market has not experienced any significant dent from the Fed’s decision to raise interest rates.

The Freddie Mac mortgage rate report at the end of December said that despite some declarations that the FOMC’s recent decision to raise the federal funds rate was a “disaster,” the FOMC’s decision is having a limited impact on mortgage interest rates thus far.

While the most recent report from Freddie Mac shows that mortgage rates surpassed the 4% threshold for the first time in five months, Sean Becketti, chief economist with Freddie Mac, attributed the rise to Treasury yields jumped reacting in part to strong consumer confidence in December.

And although mortgage applications significantly tumbled this week, the Federal Reserve’s recent interest rate hike wasn’t to blame, according Capital Economics.

The Fed’s next meeting is scheduled for Jan. 26-27. 

Source: WSJ
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