Home » Bangor » Fed Quickens Pace, Raises Rate 3 Months After Last Hike

Fed Quickens Pace, Raises Rate 3 Months After Last Hike

The Federal Reserve voted on Wednesday to again raise the key interest rate one-quarter percentage point, the first of three hikes anticipated for 2017. The rate was increased one-quarter percentage point just three months ago, in December 2016.
“In view of realized and expected labor market conditions and inflation, the [Federal Open Market] Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent,” according to a statement by the Fed. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”
The probable decision, which followed encouraging employment figures in February, marks a turning point in policy. The Fed raised the rate only twice in the past decade; Wednesday’s decision quickens the pace, signaling the potential for more aggressive action as the year unfolds.
Rising rates have been top of mind for members of the housing industry, who fear diminishing affordability—a concern, still, that could be overblown. A recent survey by Zillow Group Mortgages revealed the majority of homebuyers would see their purchase plans through if rising rates resulted in a $100 increase to their mortgage payments. Many would continue with their plans even if their payment were to increase by $200.
Mortgage rates are indirectly impacted by the movement of the key rate. The 30-year fixed mortgage rate jumped to a year-high last week.
While this may have a downward effect on buyer demand, home prices are still at historic lows and interest rates remain relatively low. These two factors make for robust activity in the 2017 real estate market.

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