Decision expected this week from Federal Reserve on whether to raise rates
The Federal Reserve is expected to raise short-term interest rates sometime in the near future, but the big question is when. The Fed is scheduled to meet this week, announce its decision tomorrow, and will meet twice more before the end of 2016.
Steve Rick, chief economist for CUNA Mutual Group believes the nation’s central bank will wait on raising short-term interest rates until its December meeting.
“Wages are still rising by 2.6 percent year-over-year, and unemployment is kind of stuck at 4.9 percent and hasn’t dropped much. And so, with inflation still running low and wage pressures not building, I think that gives the Fed the leeway to have a little bit more patience and keep interest rates at exceptionally low levels for another two to three months,” Rick says.
Robert Dietz, chief economist for the National Association of Home Builders, is also expecting no change until December.
“We are forecasting one rate hike in 2016, after the December meeting,” Dietz says. “NAHB believes that mortgage interest rates will remain at historically low levels in the quarters ahead. Income growth and solid job creation are positive tailwinds for the housing market, and we are finally seeing evidence of builders moving into the entry-level market.”
A just-released TransUnion study measured the anticipated impact of interest rate increases on consumers. “[We] analyzed consumers with variable-rate products such as credit cards, HELOCs, and some mortgages and personal loans,” says Nidhi Verma, senior director of research and consulting for TransUnion. If rates increase as expected in 2017, TransUnion’s study found that with a rise of just one percentage point, an additional 2.5 million consumers might not have the financial capacity to absorb the “payment shock.”
Read more at Nerd Wallet.