Interest Rates Likely to Stay Low Longer

Ben Lane  |   October 29, 2015

The Federal Reserve once again decided not to raise the federal funds rate this month, saying the economy is still falling short of benchmarks. That likely means home buyers will be able to take advantage of lower mortgage rates for awhile longer too. Read more: Were Low Interest Rates a Good or Bad Thing? Federal Open Markets Committee members released a statement Wednesday that said in an effort to “support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current zero to one-quarter percentage target rate for the federal funds rate remains appropriate.” The FOMC will not decide on a rate hike again until its next meeting in December. At that time, the FOMC says it will assess progress with labor conditions as well as inflation pressures and expectations in deciding whether to raise rates at that time. "The Fed sent its clearest signal yet that, pending decent data, it has the December meeting in its sights for the first rate hike," Michael Feroli, an economist at JPMorgan Chase and a former Fed staffer, told the Associated Press. FOMC said economic indicators fell short of target levels and that’s why it decided not to raise the funds rate yet. The Fed has not raised interest rates since June 2006. Analysts largely predicted the Fed was going to raise rates in September, which did not happen. Jonathan Smoke, realtor.com®’s chief economist, predicted earlier this week that a rate hike was not likely. “The new home sales report covering September shows a rate well below the consensus estimate and indicates that real issues emerged late this summer in the new homes market, questioning the supposedly strong growth signals that were previously interpreted by many,” Smoke said. “Last year we picked up momentum in the late summer and fall. This year seems to be the opposite—we are losing momentum.” What’s more, pending and existing-home sales also posted declines in August, which Smoke says also has an impact on the Fed’s decision. “That decline was likely a result of the stock market declines in August and September,” he said. “If builders are not focusing on first-time buyers, they are focusing on the segments most likely to be disrupted by declines in stock portfolios and retirement plans.”

Source: The AP & Housing Wire