It’s been a consistent upward swing since 2020 – interest rates climbing and climbing as a result of the federal funds rate doing the same thing. Only recently did the increases slow down. In the real estate world, we saw a 1/2 percent drop in commercial mortgage rates and people are still wondering what is going to happen. Do an internet search for ‘what are interest rates doing’ and you’ll find predictions that they will go up, go down, soar, or crash. The bottom line is that no one knows what rates are going to be doing, but what are they doing right now?
Rates are set by the Federal Open Market Committee (FOMC), who you might call the Fed (though that is really the Federal Reserve), at 8 regular meetings per year. The next one is March 19-20, so we should expect a decision at that time. Don’t expect your rate to change much in the meantime. As you will recall, the FOMC sets the federal funds rate, and that has a significant impact on the rates that banks charge to borrowers (though it doesn’t directly set that rate). Usually your rate goes up when the federal funds rate goes up.
The FOMC makes its decision behind closed doors and their reasons aren’t always known, but that doesn’t stop people from making predictions. We do know that the FOMC uses some metrics to make its decision, though there might be more or less at any given meeting:
- Monthly jobs growth
- Unemployment rate
- Initial jobless claims
- Labor force participation rate
- Consumer price index
- Producer price index
- Average hourly earnings
- Treasury yield
- Volatility index
Which is why when any of these get announced, we hear predictions about the fate of the federal funds rate and the mortgage you are looking for. One component of the consumer price index is the personal consumption expenditures price index (PCE) and January’s report just came out yesterday. It showed an increase of 0.4%. Inflation decreased to 2.4% in January. What does this mean for your mortgage?
This means that the FOMC will be encouraged by its use of the lever of the fed funds rate. It will be pleased that the increase in rates has caused inflation to continue to decrease to its target of 2%.
What are Rates Going to Do?
And now the prediction (take it for what it’s worth): It is likely that the FOMC will keep the rate the same in March. If it moves at all, it will tick up slightly, but don’t look for it to go down.
If you were waiting to buy that new investment, you’ll be waiting a lot longer now. Look at the numbers and don’t try to time the market. If the numbers are right, go for it. Even now. As ever.
