By Jason Boone
Not that it was altogether unexpected, but the Federal Reserve voted on Wednesday to stand pat with its key federal funds rate. Still, such a move (or lack thereof) probably will be cause for relief for anyone worried that they might have missed their chance of grabbing a mortgage at a historically low rate.
Looking deeper into the meeting, though, there was certainly cause for optimism, and concern, for what lies ahead. This is not such a bad thing. It was not long ago that the Federal Reserve hiked its federal funds rate for the first time in years. The move was controversial, and months later some speculated that a negative interest rate policy might be possible.
The Fed is adopting a cautious approach to its key benchmark rate. Why? Well there is good and bad in the economy. The labor market is improving, the Fed noted, but growth in certain sectors has slowed.
Perhaps most important, though, was that the Fed seemed genuinely more optimistic than it did in March.
Some things to gleen from the Fed meeting:
- The Fed left the impression that any future hikes are truly indeed up in the air, but it most certainly left the door open for an uptick in June.
- Inflation has slowed, giving the Fed an opportunity to take a cautious approach.
- Another rate hike appears to be in the cards at some point this year, and that will eventually affect mortgage rates.
- The Fed remains concerned about economies overseas.
- The Fed Committee was all but unanimous in holding rates steady. Only Kansas City Fed President Esther George thought the Fed should hike rates, saying that the economy was strong enough to support such a move.
According to Bankrate.com, the average rate on a 30-year mortgage on Wednesday was 3.63, which is still historically low. And those low rates are helping to keep homes relatively affordable, even as prices have risen.
The Federal Reserve will meet again on June 14-15. But until then, it appears that the Federal Reserve will continue in wait-and-see mode. And that means interest rates will likely remain low well into the summer.
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