Report: Federal Reserve Says No Interest Rate Increases This Year | Think Realty | A Real Estate of Mind
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Report: Federal Reserve Says No Interest Rate Increases This Year

Federal Reserve Interest Rates

The Federal Reserve announced after its March meeting that it will leave short-term interest rates unchanged for 2019 and will not raise rates for the remainder of the year.

This marks the end of five consecutive quarters of rate increases by the Federal Reserve. The Federal Open Market Committee indicated that the Fed is taking a more cautious tone with rates as it monitors inflation and other global economic developments.

“In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the FOMC wrote in a statement.

The Fed’s key benchmark rate is now 2.25 to 2.5 percent. While the Federal Reserve’s rate is not directly tied to mortgage rates, it often will influence them.

Fed Chairman Jerome H. Powell asserted that the economy, “is in a good place,” that “economic fundamentals are still very strong,” and that Fed officials “see a favorable outlook for this year.”

Powell also acknowledged that growth is slowing compared to a year ago and will likely continue slowing into 2020, “but we don’t see a recession.”

The Fed expects 2.1 percent growth this year compared to the 2.3 percent that was forecast in December.

In response to the news, Mike Fratantoni, chief economist of the Mortgage Banker’s Associate, said that there were bigger takeaways from the Fed’s announcement.

“The bigger news from this meeting was the clear signal that the Fed will stop allowing their balance sheet to shrink, and will begin to allow it to grow again starting this fall. Fed officials have noted that they would like to return the balance sheet to primarily Treasury assets, meaning that MBS (mortgage-backed securities) will continue to roll off, with the proceeds being invested in Treasury securities,” he said. “The Fed also noted the potential to sell ‘residual holdings’ of MBS at some point, but that they would give plenty of notice before doing so. Over time, these changes could put some upward pressure on mortgage-Treasury spreads – and ultimately – mortgage rates.”