Matching June’s historic move, the Federal Reserve announced today that interest rates are rising .75%. When the dramatic hike first occurred last month, it marked the sharpest single increase in rates since 1994. Now, it seems like the new normal.
Following the Fed’s meeting, the target range for the federal funds rate sits between 2.25% and 2.5%.
The decision was agreed upon unanimously by the Federal Open Market Committee (FOMC) in an attempt to hamper rampant inflation. A statement provided by the FOMC details some of the root causes. Among them: supply and demand imbalances due to the pandemic, high food prices, high energy prices and Russia’s ongoing war against Ukraine.
In the long run, the committee hopes to achieve a national inflation rate of 2%.
The National Association of REALTORS® (NAR) provided an instant reaction to the news.
“This is unlikely to do any further damage to mortgage rates,” NAR Chief Economist Lawrence Yun said. “The long-term bond market, off of which mortgage rates are generally priced, has mostly priced-in all future actions by the Fed.” He added that the bond market may have already peaked when the 10-year Treasury shot up to 3.5% in June.
“If mortgage rates do stabilize near the current rates, home sales will be dependent on jobs and consumer confidence,” Yun said. So, with job creation on the rise, home sales may stabilize soon — and could even turn upwards at the start of next year.