InternationalInvesting

Why did the interest rate forecast for 2016 change?

And what does that mean for interest rates, mortgage rates and real estate?
  • Last week, the Federal Reserve reduced the slope of future rate forecasts and emphasized overseas instability over U.S. risk of inflation.
  • The Fed today has some concern that the oil and commodity downward shock of the last two years will reverse, and/or the fall in import prices caused by a strong dollar.
  • The Fed’s decision last week was big in part because every measure of core inflation began to turn up at the end of last year.

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Last week, I issued a "rate warning," and then the Fed surprised after its meeting -- not by standing pat, which everyone expected, but by reducing the whole slope of future rate forecasts and emphasizing overseas instability over U.S. risk of inflation. I heartily concur with the Fed’s decisions. However, here in the housing business, concerns continue. [graphiq id="8vQXl6cCXvD" title="Federal Funds Rate vs. Inflation" width="600" height="605" url="https://w.graphiq.com/w/8vQXl6cCXvD" link="//www.graphiq.com/wlp/8vQXl6cCXvD" link_text="Federal Funds Rate vs. Inflation | Credio"] First, for rates to go lower, we’ll need more bad stuff to happen overseas -- and we may not get that soon, or bad enough. Meanwhile, if U.S. inflation does change and trend upward, then the Fed will abandon the outside world and tighten up interest as necessary. What inflation is (and isn't) Any estimate of future inflation must begin by revisiting what inflation is and isn’t, especially ...