Federal Reserve Interest Rate Update
March 31, 2017
As expected, the Federal Reserve recently raised interest rates for the second time in three months, a move made based on steady economic growth. The increase followed last Friday’s strong jobs report, which showed 235,000 payroll gains in February, as well as faster wage growth and a drop in the unemployment rate to 4.7%.
The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing.
The Fed’s policy-setting committee did not flag any plan to accelerate the pace of monetary tightening. The committee indicated that further rate increases would be gradual, maintaining their prior forecast for two more rate hikes this year and three more in 2018. The Fed lifted rates once in 2016.
Mortgage rates have risen since the election but remain historically low. During the last economic expansion from 2001-2007, mortgage rates hovered between 5% and 7%. In the 1990’s, rates were even higher, skirting between 7% and 9%.
With consumer confidence high, employment strong and continued low rates, it is a good time for consumers to consider a real estate purchase or a mortgage refinance prior to potential future rate increases.