Fed raises interest rates & offers additional insights
Key takeaways from today’s Federal Reserve announcement are as follows:
*FED WILL CONTINUE SAME PACE OF REDUCING TREASURY, MBS HOLDINGS
*FED RAISES BENCHMARK RATE 25 BPS TO 4.75%-5% TARGET RANGE
*FED SAYS `SOME ADDITIONAL POLICY FIRMING MAY BE APPROPRIATE’
*FED: US BANKS SOUND, RESILIENT BUT EVENTS TO WEIGH ON GROWTH
*Fed Officials Lower Growth Forecast for 2023, 2024
*FED REPEATS HIGHLY ATTENTIVE TO INFLATION RISKS
*FED: RECENT DEVELOPMENTS TO LEAD TO TIGHTER CREDIT CONDITIONS
*Fed predicts unemployment to rise to 4.5% in 2023 vs previous 4.6%
The Fed delivered a 25bps interest rate hike as expected while acknowledging that banking system turmoil might end its rate hike campaign sooner than expected.
Fed Chairman Jerome Powell stated, “recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain.”
Treasury yields fell right away, led by the front of the curve. 3-year yields were initially 11-13bps lower. Median Fed Funds currently at 5-5.25% in 2023, 4.3% in 2024.
Three rate cuts are now penciled in for 2024 instead of the previously predicted four. 3.1% interest rates in 2025 is the updated target. MBS tried to rally after the announcement, and were up 9/32nds. The unemployment rate sits at 4.5%. The Fed is also projecting 0.4% GDP growth and gave a small upgrade to the inflation numbers. The overall announcement was in line with expectations. However, the Fed tone much more dovish this time around.
The biggest takeaway from the statement was pulling back on “ongoing increases” to the policy rate, while saying that the “US banking system is sound and
resilient.”
Further, Powell went on to say “it’s still too early to tell how stress in the banking section will affect credit conditions,” and that if stress in the banking sector has a larger impact, then “monetary policy will have less to do.” Rates, immediately fell after the statement. They were led by short-term rates, which track more-closely to the Fed Funds rate.
Jeremy Collett is Guaranteed Rate’s Executive Director of Capital Markets. Market Updates are designed to provide readers with a high-level yet insightful view of how economic news, events and trends affect mortgage rates and the home buying process.
Pre-Approval
in 10 minutes?
in under 10 minutes. Grab a few important documents to get started.
- Tax Returns
- Copies of W-2s (or 1099s for independent contractors,
freelancers and the self-employed) - A payroll stub
- A bank statement
- Loan obligation info (student loans,
auto loans and credit cards)
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply.
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate. Guaranteed Rate its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
