Markets, and Mortgage Rates, Respond Positively to Recent Comments by Fed Chairman Jerome Powell

Mortgage Loan rates softened slightly after the latest comments from the Federal Reserve Chairman Powell’s regarding the state of the economy and current interest rates. The market, which has been sensitive and jumpy with concerns of rate increases impeding economic growth, responded positively to these comments as well.

We are currently in the 10th year of economic expansion and recovery from the 2008 recession. The unemployment rate at 3.7% is a low not seen in the last 50 years. Fifty. So yeah, the economy is doing good. Due to the overall health of the economy the Fed has been gradually raising rates in 2018 with 3 rate increases. Mortgage rates are indirectly affected by these rate increases. The market has generally not reacted great to the rate increases with pretty large drops after the announcement of said increases.

Two words stood out strongly in comments made by Powell recently: the interest rates are currently “just below” neutral  meaning they are almost at the point where the Fed is not tapping the breaks nor hitting the gas. This is a change in tune from only a month prior when Powell said interest rates were still “a long way from neutral” which left markets reacting wildly with the thought that increasing interest rates could very well impede economic growth.

Mr. Powell also made the other market-comforting remarks including:

• We know that moving too fast (hiking rates) will risk expansion

• It may take a year or more to fully realize the effects of hikes

• The Fed doesn’t see “dangerous excesses” in the stock market

Most likely we will see another increase after the impending Fed meeting this month. There will most likely  be a few, hopefully just small, increases in 2019 as well. Most economic forecasters anticipate economic growth to continue through 2019 at more stable rates than some experienced in the recent recovery years.