Fed PolicyInvestmentsMortgage

ItÕ official: Fed raises interest rate for the second time this year

Fourth increase since December 2015

As predicted, the Federal Open Market Committee announced after its June meeting that it is raising the federal funds rate for the second time this year.

According to an announcement from the Federal Reserve, the FOMC voted to raise the target range for the federal funds rate by 25 basis points to a range of 1% and 1.25%.

The Fed first announced it raised interest rates this year during its March meeting when it increased the federal funds rate by 25 basis points to a range of 0.75% to 1%.

Then prior to the March meeting, the Fed raised rates in its December 2015 and December 2016 meeting, increasing to a range of 0.25% to 0.50% and then to a range of 0.5% to 0.75%, respectively.

Federal Reserve Bank of Minneapolis President Neel Kashkari was the only person to vote no.  

Up until this meeting, the common consensus was that the Fed would raise interest rates in June. However, it still wasn’t guaranteed. The release of May Federal Open Market Committee meeting minutes created a seed of doubt, revealing that the central bank was divided on whether to raise rates.

But despite the May meeting minutes, economists still predicted a June rate hike. Fannie Mae forecasted that the Fed would raise rates in June and December.

Similarly, Financial Analyst Christopher Whalen predicted a rate hike in June, but he added that it might be the last one for a while since FOMC members are beginning to see the U.S. economy slow down.

Ruben Gonzalez, economist for Keller Williams, commented on the rate rise, saying, “We expect mortgage rates will remain above the previous years through the summer as the Federal Reserve continues to tighten monetary policy.”

“While the increase in rates by the Fed has been well anticipated given the progress seen in unemployment, low inflation and wage growth are still a concern and we anticipate they will move forward cautiously in the second half of the year given the asymmetric nature of policy available to counteract an economic slowdown versus a nascent acceleration in inflation,” said Gonzalez.

There are four scheduled FOMC meetings left for this year, with the next one schedule for July 25 through 26.

 

 

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