U.S. stocks post weekly gains amid Fed's interest rate hike, positive data

Cornelia Mascio
Marzo 21, 2017

"Reports have suggested, or surely will, that this rise in mortgage rates will be the demise of the housing market". The move represents the first of what central bankers see as a total of three rate increases for 2017, a projection that did not change at after last week's meeting. "Because most ARMs only adjust once per year, the next rate reset could be a doozy if it encompasses 2 or 3 Fed hikes in the interim". Headline unemployment remains below the Fed's 5% target but broader measures of USA labour-market health that count under-employed workers and people who have given up looking for work are still above their pre-Great Recession levels.

The Federal Reserve is on pace to hike interest rates two more times this year following a tightening of policy last week, Chicago Fed President Charles Evans stated today. The Fed's preferred gauge of price pressures, excluding food and energy, rose 1.7 percent in the 12 months through January, still a bit shy of its 2 percent goal.

If you're in the market for a fixed-rate mortgage, the Fed's latest statement came as a relief because it didn't trigger a spike in US bond yields that would have nearly certainly taken their Canadian bond-yield equivalents along for the ride (which our fixed-rate mortgages are priced on).

Rising inflation is expected to drive the monetary policy decisions to come in 2017, and the expectation of two more hikes in the latter half of 2017 will likely keep impacting the real estate sector negatively. "Yes, many existing homeowners will have a financial disincentive to sell because they would lose their lower than prevailing mortgage rates in doing so, the so-called rate lock-in effect".

"We do not have a high-inflation threat right around the corner", Kashkari said during an interview on Bloomberg Television Monday, adding that the lack of price pressure affords the Fed patience in raising rates. Indeed, McBride comments, "Borrowers with adjustable rate mortgages that are seeing their rates reset should brace for higher payments".

The Minneapolis Fed chief cast the sole dissent when the Federal Open Market Committee voted on March 15 to raise rates.

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