Mar 162016
 

I find this assessment kind of amusing, and I think it’s yet another indicator of the capricious nature of finance forecasting:

The Fed has always maintained that the timing of rate increases would depend on the data, and the data have been uncooperative. Global risks have increased, inflation expectations have fallen, and financial conditions have tightened as equity, commodity, fixed income and foreign-exchange markets have adjusted to the new reality.

Tighter financial conditions are the equivalent of Fed rate hikes.

We shouldn’t be surprised to see more surprises this year. The global economy is not on a smooth path, and it wouldn’t be a surprise to see the Fed adjusting its expectations for the key economic variables as well as the federal fund rate. (Source link: MarketWatch.com)

The “global economy is not on a smooth path” and the Fed’s potential to adjust its path in 2016 in light of the economic variables “wouldn’t be a surprise.” Perhaps the great irony of how things went after the Fed’s December rate hike is that the Dow sunk about 2000 points, The US 10yr Treasury Note yield dropped about half a percentage point, and the per barrel cost of crude oil dropped about 20%. And by February, in reaction to all these “economic variables,” mortgage rates were down to a 9 month low.

So… uh… hmmm… no rate hike announced at today’s Fed meeting… but we may be hiking the rate twice in 2016… unless we don’t… because… uh… “variables.”

Just wanted to remind you guys that a Fed rate hike absolutely does not always result in higher mortgage rates for consumers, at least not in the near term. In this particular case the rate hike appeared to have the inverse effect for consumers. Truth is, there really are a variety of factors (variables) that affect consumer rates and the Fed’s influence is only one of them.

And the great news is that rates right now TODAY are excellent— 30yr conforming fixed quotes consistently under 4%— so if you’re considering refinancing or purchasing right now is still a great time for getting a loan.

Oh, yeah… and the bit about two hikes coming later in the year? Who knows, really? Maybe. Maybe a totally different set of “economic variables” will be in play later in the year; things we cannot know right now… because they’re in the future. What we can confirm though is that right now rates are good. But the stock market and oil prices both appear to be rising now, and if investor funding shifts back to speculating on the higher returns that stocks and futures deliver (versus the security of fixed rate bonds) we could see those consumer rates tick up a bit. We’re keeping an eye on it.