December 16 2017

Mortgage Rates Thursday: Up a Notch Following Fed Meeting

December 16 2017, 04:54 | Clarence Walton

Mortgage Rates Thursday: Up a Notch Following Fed Meeting

Forex Market Review (European Session) – Markets digest Fed message as dollar corrects; aussie drops on Chinese ...

The central bank also announced it would next month begin cutting back on its holdings of bonds and other assets built up as part of a scheme to keep rates low and steer the economy through the global financial crisis a decade ago.

According to the well-telegraphed plan, the Fed will start by trimming no more than $10 billion per month from its balance sheet, with that cap rising each quarter for a year, until it hits $50 billion per month.

"Federal Reserve Chair Janet Yellen said stubbornly low inflation this year is something of a * a itemscope="itemscope" itemprop="StoryLink" href="/news/terminal/OWLDGD6TTDS1" class="terminal-news-story" target="_blank" rel="nofollow noopener" *"mystery" to central bankers.

"Before the Fed announced its decision, there were high expectations that monetary policymakers would drag interest rate expectations lower for 2017", said Hussein Sayed, chief market strategist at FXTM.

Still, a majority of Fed policy makers projected that they see the USA central bank's benchmark rate rising by a quarter percentage point by year end from its current range of 1 percent to 1.25 percent.

Fed members also said that they now project faster growth for 2017, with a median forecast of 2.4 percent gross domestic product growth, versus a June projection of 2.2 percent.

Mortgage Rates Thursday: Up a Notch Following Fed Meeting
Mortgage Rates Thursday: Up a Notch Following Fed Meeting

If the Fed reduces its balance sheet, investors are betting that would lift yields for longer-term treasuries, which could boost bank profits, Detrick said.

Fed officials cautioned that the devastation of Hurricanes Harvey, Irma and Maria would hold back the US economy in the "near term". At a two-day rate review ending on Thursday, the BOJ is widely expected to maintain its short-term interest rate target at minus 0.1 per cent and the 10-year government bond yield target of around zero per cent.

The U.S. Federal Reserve will resume rate hikes in December and raise borrowing costs three more times in 2018, a Reuters poll found on Wednesday.

The Fed left rates unchanged for now, as was widely anticipated, but investors' expectations changed for December after the U.S. central bank signaled one more rate hike by year-end despite recent weak inflation readings. "It could hurt financials and the overall market might not like the uncertainty", he added.

The Fed news is "kind of consistent with the view that the economy is doing OK, and as far as equity investors are concerned, another rate hike is not going to change that view", Joy said.

US bond yields rose, pushing up the USA dollar after the Fed's decision, but USA benchmark stock indexes were little changed. The Standard & Poor's 500 index of stocks has risen just 0.08 percent ahead of the Fed announcement at 2 p.m. That's an upward revision from the central bank's forecast in June, when it forecast that the economy would grow by 2.2% this year.

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