June 17th, 2022 1:20 PM by Sam Kader MLO130505
With inflation running at a 40-year high, fueled by strong consumer spending, pandemic-related supply chain disruptions and soaring energy prices - the Federal Reserve announced on Wednesday (6/15/22) its highest rate hike since 1994 by increasing Fed Funds rate by 0.75% to fight against inflation bringing current Fed funds rate at 1.75%. The rate-hike is higher by 0.25% due to inflation was running hotter than anticipated. As a result, mortgage rates reached their highest level since 2008 on Thursday (6/16/22). Since then, rates have been improving and stabilizing.
The central bank is committed to bring inflation down from currently at 8.6% to Fed's target rate at 2%. The Fed's Chair Jerome Powell said that another 0.75% hike is possible at the Fed's next meeting in July if inflation pressures remain high. However, he re-assured the market that such increases would not be common. Powell's goal is to hit hard on inflation but comfort the market for a "soft-landing". However, economists say that it's almost inevitable that the Fed will have to inflict some pain in the form of higher unemployment as the price of defeating high inflation. Unemployment is forecasted at 3.7% by end of 2022 and 3.9% by end of 2023. Powell said that even an unemployment rate that tips above 4% would reflect a healthy economy especially if it was accompanied by more stable prices (aka low inflation rate).
On another news – our local housing market is showing signs of cooling off. If you are in the market to buy a house or refinancing - now is the time to explore your rate options or lock your rates before the next rate hikes.