The Federal Reserve’s Open Market Committee today continued its course of raising the target for the federal funds rate by .25 percent, bringing it to 2.5 percent.
The move is the sixth hike since last summer, beginning with a 25 basis point hike at the end of June, which was the first time the Fed had raised the rate in four years. The Fed appears poised for more rate hikes until it reaches what it considers a neutral monetary policy.
Rates on long-term mortgages so far have not followed suit. Most economists, however, predict a gradual rise in rates over the course of the year. Rates on 30-year fixed-rate mortgages increased slightly to 5.61 percent in the Mortgage Bankers Association’s weekly survey released today. Rates on 15-year fixed-rate mortgages increased to 5.1 percent.
The Committee in its statement said it believes “even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.”
Despite a rise in energy prices, output appears to be growing at a moderate pace, the group said. Labor market conditions continue to improve gradually and inflation and longer-term inflation expectations remain well contained.
“The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters to be roughly equal. With underlying inflation expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.
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