Fed Minutes Show Rate Hike Could Happen ‘Fairly Soon’

According to the minutes from the Federal Open Market Committee (FOMC) meeting on Jan. 31-Feb. 1, Federal Reserve officials think that a rate hike might be appropriate “fairly soon.” Here is the main quote that financial market participants have picked up on:

“Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations or if the risks of overshooting the committee’s maximum-employment and inflation objectives increased.”

Much of the discussion during the Fed’s two day meeting was focused on what kind of influence potential policy changes from the Trump would have on the U.S. economy. That makes sense when you consider that this was the first FOMC meeting since Trump was sworn into office. Several Fed officials argued that deregulation and corporate tax cuts could stimulate the economy and usher in the need for the Fed to raise rates.

However, not everyone was so optimistic. Some Fed officials felt that the policies that are being talked about might not even come to fruition, meaning that there would be less pressure to raise rates in the near term. Clearly, the Fed is still grappling with the uncertainty brought about by the Trump administration.

Click here to get today’s latest mortgage rates (Feb. 22, 2017).

With so much talk recently about a March rate hike, many investors were hoping for a strong hint in the minutes. That did not happen. Instead, they got some classic fedspeak. Because when it comes down to it, the Fed saying that it might be appropriate to raise rates “fairly soon” is something that doesn’t mean much. After all, they were saying that all last year and only wound up hiking rates once in December.

That seems to be what investors are thinking, as the odds of a March rate hike via the Fed Fund futures are actually unchanged from where they were before the minutes, at 17.7%. That means that if the Fed were to go ahead and raise at their March 14-15 meeting, it would catch the markets off-guard, and cook cause a bit of mess.

Of course, there is still time between now and then for the Fed to bolster rate hike sentiment, but time is definitely running out.

from Total Mortgage Underwritings Blog http://ift.tt/2l0Dx4w