Federal Reserve Chairman Jerome Powell recently announced a major policy shift to help boost inflation and promote job growth. He made it very clear to the financial markets that interest rates will remain lower for longer.
The Fed is going to remove its 2% target for inflation, as measured by the annual Core PCE (Personal Consumption Expenditures), and allow inflation to drift higher and remain there for some time before hiking rates.
In addition to allowing inflation to rise, the Fed will also allow the labor market to run “hotter” and create even more jobs before considering a rate hike.
This major policy change is the exact opposite of how the Fed previously addressed inflation and improving economic conditions, with frequent rate hikes “before” inflation and the labor market heated up.
The result: The Fed is not likely to hike the Fed Funds Rate for years. So, short term rates such as auto loans, home equity lines of credit, and credit cards will remain near current levels for quite some time. Savings accounts will also offer no meaningful interest for savers.
In addition, if inflation increases as the Fed wants, home loan rates will most likely rise as inflation is the tide that lifts all boats. The good news is that inflation is currently very low and that’s what’s holding home loan rates near all-time lows … for now.
Bottom line: With mortgage rates at ultra-lows and the possibility of a modest increase, it’s a great time to refinance or purchase a home.
I’ll continue to monitor economic reports closely, but if you have any immediate questions, please call or email today.
Source: Mortgage Market Guide
We are ready to help you find the best possible mortgage solution for your situation. Contact Sheila Siegel at Synergy Financial Group today.
