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Bright economic forecast brings rate hike

Posted by The Aramco Group on Fri, Dec 16, 2016 @ 14:12 PM

The Federal Reserve announced on Wednesday that it will move to increase short-term interest rates and released an economic forecast for 2017. This is the first move to raise the benchmark rate in a year and the first major announcement and forecast since Donald Trump was elected president.

The increase amounts to a quarter of a percentage point, bringing the new rate to between 0.50 and 0.75 percent. A strengthening economy and positive outlook for next year were among the driving factors for Fed officials. It was also indicated that 2017 would likely see three additional rate hikes instead of the previously predicted two. In total, this would drive rates up by another three-quarters of a percent.

While home loans do not have direct correlation to short-term rates, the Fed's monetary policy decisions do have implications far and wide. Mortgage rates, rather, are more closely tied to the bond market, namely, the 10-Year Treasury note which rose following the announcement, pushing mortgage rates up .125 percent..

Conforming no-point 30-year fixed rates are averaging 4.25 percent while the 15-year rates are near 3.375 percent.

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