The Federal Reserve remains dedicated to reducing inflation. With inflation remaining higher than we’d all prefer, the Fed just increased rates by another .75% — but what does that mean for you?
The Federal Reserve’s goal is to maximize employment and promote price stability in the economy. When unemployment rates are low and inflation is high, the Fed is focused on the price stability side of their mandate. When the economy heats up and inflation rises, the Fed tries to slow things down by increasing the cost of borrowing money. That is why they are continuing to raise short-term rates: they are attempting to slow the price increases we are seeing in food, energy, and other daily expenses.
Mortgage rates are not directly controlled by the Federal Reserve. Said simply, mortgage rates did not increase .75% with today’s announcement. However, investors often look to the Fed Funds rate as a bellwether for the overall rate environment. When rates are increasing, investors look for higher rates in mortgages, too.
Investors don’t just look at what the Federal Reserve does today; they also look at how their actions projects to the future. With a forward-looking view, investors can make educated guesses about future rates that influence the rates they are willing to provide today. Accordingly, investors often focus even more on what Federal Reserve Chair Jerome Powell says in his press conference — not just in what is written in the official statement.
Markets are dynamic, and events like today’s FOMC statement can impact the rates offered to borrowers like you. If you’re in the market to buy a home, stay in touch with the experts at First Home Mortgage who can help keep you informed as we navigate this challenging market together!
Author: James Baublitz | VP, Capital Markets