Published: Thu, March 16, 2017
Technology | By Kate Woods

The Fed Isn't Betting on the Trump Bump (Yet)

The Fed Isn't Betting on the Trump Bump (Yet)

Although this rate is not the same thing as the mortgage interest rate that buyers pay when they take out on a loan on a home, movement of the Fed rate up or down can put pressure on mortgage interest rates.

Earlier markets had factored in a rate increase as a near certainty.

Nigel Green, founder and chief executive of financial consultancy deVere Group, added: "This rate rise by the world's de facto central bank confirms that we're in a new era of higher inflation and higher interest rates".

Nevertheless, if the Fed surprisingly doesn't raise rates today, then it will also likely cause great market volatility with the likelihood of United States dollars selling pressure.

The Fed's policy-setting committee's forecast showed it meant to stick to its previous policy of "gradual" tightening, with two more rate rises this year, and three rises in 2018.

The Fed indicated today that it expects to make two more rate increases this year and three next year.

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For consumers, experts say, now remains a good time to refinance adjustable rate mortgages and lock in a fixed rate in the expectation that interest rates will only climb higher.

The Fed meets over two days starting Tuesday, with traders pricing in a 90 percent chance of a quarter point rate hike as inflation picks up and the labor market shows solid strength.

In this morning's announcement, Federal Reserve chair Janet Yellen sought to reassure investors that the central bank's latest interest-rate increase did not represent a shift to a more aggressive policy driven by fears of faster inflation. United States inflation continues to run below its target and is expected to do so for the foreseeable future.

The Fed's "dot plot" still indicates three rate hikes this year and next, but inched up in 2019, when it projected the median fed funds rate could be 3%, instead of its 2.9% forecast last December.

The Federal Reserve raised interest rates another quarter-point Wednesday, signaling continued confidence in the nation's improving economy. Fed's assurance that any further hikes this year will be gradual, came as big relief for the markets. Stock prices rose sharply on Wednesday after the hike.

Backing the USA rate hike were encouraging economic numbers. After December's meeting, Fed officials hinted at its December meeting that three rate increases were coming in the near future. Her rate changes will be gradual.

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