The Fed Increases Interest Rates for Third Time in 2017

The Federal Reserve has raised the federal funds rate for the third time this year, from 1.25 to 1.5 percent. The rate hike is principally based on the expectation from the Fed that the economy will improve next year, and additional rate hikes are expected in 2018.

The federal funds rate is utilized as an instrument to manage and cultivate U.S. economic growth. From bank loans and credit cards to conventional mortgage interest rates and deposits, the federal increase influences most other rates that banks offer.

The interest hike could represent another burden for American consumers making their way through the holiday season. For homebuyers, this may be a step backward from having rising home prices recently offset by decreased mortgage rates and increased conforming loan limits for Fannie Mae and Freddie Mac.

For women, who experience difficulty accessing business capital, are given higher mortgage rates despite lower default rates, and have higher lifetime medical expenses, the effects of the rate increase loom large and worrying. While an improved economy—with higher wages, revenues and buying activity—can complement the federal funds rate and generate economic growth, any growing pains are levied on the backs of consumers.

The Federal Open Markets Committee (FOMC) articulated in a statement their view of the new year and the imminent 2018 rate increases. “The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the statement said. “However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

“The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong,” the statement continued. “Inflation on a 12‑month basis is expected to remain somewhat below 2% in the near term but to stabilize around the Committee’s 2% objective over the medium term.”

Become a member of NAWRB today! LEARN MORE

Leave a Reply

Your email address will not be published. Required fields are marked *