Market reaction to Fed announcement continues

International reaction to the fed | mortgage rate news

How did the global banking industry react to the Fed rate hike?

Central banks throughout the world woke up to the US Federal Reserve raising interest rates 75-basis points, and they all had their own reaction.
Switzerland, Britain, and about half a dozen other central banks chose to raise interest rates like the US did. Switzerland’s rate increased to 3.5%, while Britain is nearly at 10%.

Japan was one of the outliers, and chose to keep interest rates steady on Thursday. Traders reacted by pushing the Yen to a record low against the dollar.

Turkey’s central bank continued to buck global trends and actually cut interest rates. Inflation in Turkey is running at nearly 80% and the Turkish Lira is at an all-time low against the dollar.

Bonds market gets battered

Foreign markets weren’t the only ones that struggled on Thursday. The bond market in the US got beaten up in reaction to the rate hike. 5-7 year bonds were hit the hardest, but almost every sector ended to the downside on Thursday. Traders appear to believe that the Fed will continue taking rate hikes higher and possibly for a longer period than was previously expected.

Has the housing correction already started?

Some experts believe the US housing market is already in a ‘correction’, and it won’t be ending soon.
There are several factors keeping housing prices up. First, inflation is way up and that has driven up cost of living, including the price of homes. The Fed is raising interest rates to cool off inflation, and will continue to do so for the foreseeable future. Second, homeowners in mortgages at historically low rates aren’t eager to sell into a rising rate environment. Until current homeowners have a need or reason to get out of their mortgage, they’re probably not going to. Third, home inventory has been low for quite a while. The housing market will need an increase in inventory to truly cool off. An increase could come through new home builds, existing home sales, or a mixture of both.

There was some news that home sales have started to cool in August, but they still have a long way to go before the market conditions improve for prospective buyers.

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