Interest rates rise for 3rd time in 2018
The Federal Reserve announced it will raise interest rates by 0.25% to 2.25%, marking the third rate hike of the year. This monetary policy action was unanimously approved by the Federal Open Market Committee.
The Federal funds rate is now at its highest level since April 2008, according to Yahoo Finance. The latest rate increase signifies economic confidence coming from the Federal Reserve. The rise also suggests inflation remains aligned with the Federal Reserve’s target of 2%.
Gross Domestic Product is up to 4.2% and Fed projections indicate that number could remain steady into 2019. Unemployment is also at a historic low and could remain that way into 2020, according to projections.
“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low,” the Federal Open Market Committee said in a statement. “Household spending and business fixed investment have grown strongly.”
The average contract interest rate for 30-year fixed rate mortgages with conforming loan balances was 4.97% for the week ending September 21, 2018, according to the Mortgage Bankers Association. Meanwhile, interest rates for short and intermediate mortgage products such as ARMs and 15-year mortgages have increased dramatically and are comparable to 30-year mortgage rates.
Mortgage and credit card rates could also be on the rise, with more rate hikes potentially on the horizon. The Federal Reserve could raise rates again later this year, and median estimates indicate there could be three rate hikes in 2019 as the Fed attempts to gradually raise rates following the recession. Fed projections suggest the target rate could be between 3% and 3.25% by the end of 2019.