Fed Rate Hike Could Squeeze Big Borrowers

Fed Rate Hike Could Squeeze Big Borrowers

Since US markets started showing improvements in overall economic activity, the expectation of the interest rate hike began to build in the second half of 2016. Kashkari's stance establishes him as a voice of resistance as the Fed gets moving: as of last week's meeting, officials forecast two more rate increases this year, assuming their economic projections for low unemployment and near-2 percent inflation are met.

Asked directly if the market was right to expect three interest rates this year, he replied: "I think three is entirely possible". Notably, economist Jonathan Smoke shared the following view on the Fed's rate hike on March 15: "Today's Fed announcement is going to have the greatest impact on first-time home buyers as they consider their monthly payment budgets". To be clear, the Fed's dot plot is typically out-of-whack with the Fed's actual rate hike timetable, but changes at its margins are still considered material.

The Fed voted to raise the rate with only one detractor, the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari. The Fed's preferred gauge of price pressures, excluding food and energy, rose 1.7 percent in the 12 months through January, still a bit shy of its 2 percent goal. The Fed's dovish language explains the market's muted reaction to its latest policy rate hike.

Also, he says, lending standards should loosen and mortgage rates will only moderately increase.

On the corporate front, US-listed shares in Deutsche Bank were down 3.42% after the German lender said it will raise €8bn by selling its shares at a 35% discount to last week's closing price as it looks to shore up its finances. If you are looking to refinance, you should be able to find five-year fixed rates in the 2.69% to 2.84% range, depending on the terms and conditions that are important to you. As such, the spike in our fixed mortgage rates that some had feared did not materialize, and that means its steady-as-she goes for both our fixed and variable mortgage rates.



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