Will Interest Rates Rise 2017 Summer and Fall?

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In making plans for the rest of 2017 everyone in the mortgage business expects some volatility with interest rates. We believe rate hikes are in the near future due to mounting terror attacks, home sale declines due to lacking supply and OPECs pricing along with the FED’s current policies. Below are three of the sources of interest rate forecasts we trust that seem more analytical than political.

Our Refinance program is still 35 year fixed in the 3.75 to 4.00% range today with cash out at 80% LTV and acquisitions at 85% LTV.

5/25/2017
Kiplinger: Increased Odds of Fed Raising Benchmark Interest Rate on June 14 by Kiplinger Staff Economist David Payne

The strong April jobs report raises the odds of the Federal Reserve hiking its benchmark interest rate at its June 14 meeting. The Fed is attributing the poor first-quarter GDP report to temporary factors, and the tightening of the labor market in April will keep the central bank on track to continue raising rates this year.

The Fed appears committed to a path of steady rate hikes. It will probably lift short-term rates by a quarter of a percentage point two more times in 2017, the first at its meeting on June 14 and the next on either September 20 or December 13.

In making plans for the rest of 2017 everyone in the mortgage business expects some volatility with interest rates. We believe rate hikes are in the near future due to mounting terror attacks, home sale declines due to lacking supply and OPECs pricing along with the FED’s current policies. Here are three of the sources we trust that seem more analytical than political.

The Fed appears committed to a path of steady rate hikes. It will probably lift short-term rates by a quarter of a percentage point two more times in 2017, the first at its meeting on June 14 and the next on either September 20 or December 13.

If the economy keeps growing as expected, the Fed’s monetary policy committee (the FOMC) expects three quarter-point increases in 2018 and three more in 2019, bringing the federal funds rate to 3%, the Fed’s preferred level. Fed Chair Janet Yellen and her colleagues will also be on the lookout next year for any inflationary effects of President Trump’s proposed tax cuts and spending on the military and infrastructure, if those measures get through Congress.

5/25/2017 Wall Street Journal: Fed Minutes Signal Officials Ready to Raise Rates Again Soon by Nick Timiraos [paywall]

Federal Reserve officials expected at their policy meeting this month that it would “soon be appropriate” to raise short-term interest rates, a signal the U.S. central bank could move in June at its next gathering.

The Fed also moved toward a consensus on a proposal to start gradually shrinking its $4.5 trillion in holdings of Treasury and mortgage securities later in the year, according to minutes of the gathering released Wednesday. Under the approach discussed, they would allow increasing amounts of those securities to mature over time, without reinvesting the proceeds.

Fed officials left their benchmark short-term interest rates unchanged within a range between 0.75% and 1% at the meeting May 2-3. Several Fed officials in recent weeks have said they believe the economy will still be strong enough to warrant two more quarter-percentage-point rate increases this year.

Officials were inclined to stick to that scenario even though the economy appeared to stumble in the first quarter, the minutes showed. Officials saw that slowdown as likely to be transitory. And while some expressed concern about recent softness in inflation, it wasn’t enough to knock them off track.

Their next meeting is June 13-14, which will be followed by a press conference with Fed Chairwoman Janet Yellen.

5/25/2017 FORBES contributor: Interest Rate Forecast 2017-2018 by Bill Conerly

The Federal Reserve seems inclined to raise interest rates three times in 2017, but as the data come out, they’ll stick with one and done.

The Fed’s course of action is always “data dependent,” their phrase for making it up as they go along. Thus their plans are only as reliable as their forecasts, which don’t have a great track record. The most recent minutes of the policy committee (the Federal Open Market Committee) show that members continue to expect rate hikes over the course of the year.

Here’s why I think they are wrong to expect continued economic expansion, and thus the need for tighter monetary policy: businesses will drag their feet on discretionary spending. That includes contracts for new construction of buildings, purchase orders for equipment and information systems, and hiring of workers. This delay in spending comes from uncertainty affecting major parts of the economy.