Making Sense of Today's Fed Rate Announcement

Making Sense of Today's Fed Rate Announcement

The Federal Reserve hiked its benchmark rate by 50 basis points today, 25 basis points less than the previous four increases, hinting that they will start slowing the pace of future increases.

 

The announcement was made after the Fed's final two-day policy meeting of the year, which left 2022's benchmark rate at a range of 4.25% to 4.5%, the highest level since 2007.

 

While this lesser increase is welcomed news, the Feds stated that "ongoing increases in the target range will be [required] to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time."

 

The Fed plans to make its first benchmark rate decision for 2023 on February 1.

 

Mortgage Rates: Beyond The Recent Rate Hikes

This December increase marks the seventh rate hike of the year, an aggressive effort by the Feds to cool the economy and bring inflation under control.

 

While those hikes were an indirect catalyst that drove mortgage rates up initially, mortgage rates have recently trended downward for the last four weeks in a row. 

 

Many see the Federal Reserve’s latest move as an indication that the pace of rate increases will be moderated going forward, and any increases in 2023 will be closer to 25-basis-point increments instead of the 50-75 that we've seen this year.

 

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