The rise in the Federal Funds Rate is causing Long Term Mortgage Rates to get Better!
Below in Blue is what the FED press release said, and the Red is an attempt to put it in common language.
In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate from 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.
This the “money paragraph” that traders around the world fast forward to. The Fed increased short term rates again. The Federal Funds rate (Fed Funds rate) increased from 0.75% to 1.0%. This will push up the Prime rate and other short term rates that closely track the Fed Funds rate. But, it doesn’t necessarily increase longer term rates – like mortgage rates. In fact, we are in the midst of a super-powerful bond market rally right now and 30 year rates are dropping nicely. This is largely because this statement that ya’ll are reading right now didn’t scare bond traders. Happy bond traders buy bonds. Bond prices go up when traders buy them. When bond prices go up – rates go down. Yay!
