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The Week Ahead: Will the Fed Follow Up on Rate Increases?

Federal Reserve Head Janet Yellen will give the opening keynote at Federal Reserve System Community Development Research Conference in Washington this Thursday at 8 a.m.

Last week, Yellen and the Federal Reserve announced a federal rate hike to range of 0.75 percent to 1 percent. The Fed voted to raise the rate with only one detractor, the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari. Kashkari had said that he preferred to hold rates steady for now.

According to Fannie Mae, the rate increases are not expected to impact housing in any major way. "We believe the Fed could stay on course to achieve its dual mandate with a gradual monetary normalization, which would allow housing to continue to expand,” said Doug Duncan, Chief Economist at Fannie Mae. Given continued solid job growth and recent income gains, we believe this pace of rate increase will not derail the ongoing housing recovery."

"As anticipated, the FOMC went forward with the first rate hike of 2017," said National Association of Federally-Insured Credit Unions Chief Economist Curt Long. "Given that inflation is rising and approaching the Fed's 2 percent target, Fed officials had little choice but to raise rates.

The rising mortgage rate isn't expected to affect housing demand in spring, according to First American Chief Economist Mark Fleming.

“Reports have suggested, or surely will, that this rise in mortgage rates will be the demise of the housing market. That’s just not so," sid Fleming. “Yes, many existing homeowners will have a financial disincentive to sell because they would lose their lower than prevailing mortgage rates in doing so, the so-called rate lock-in effect. I have suggested that this is one of the reasons we see low inventories in most markets today, but it’s not as simple as that. We don’t act rationally. Even economists who, of all people, should know better.”

The FOMC had previously raised the federal funds target rate to a range of 0.5 to 0.75 percent last December.

Will Yellen follow up on last week’s rate increase? Find out on Thursday.

About Author: Staff Writer


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