Fed pauses interest rate hikes, but high mortgage rates could be here to stay
MonetaryMacro.com CIO Joseph Wang argues while headline inflation has cooled, core inflation remains stuck above the Fed's target on 'Making Money.'
The Federal Reserve ended its long streak of interest rate hikes this week, but the much-anticipated pause may offer little reprieve to Americans squeezed by higher borrowing costs.
The widely expected decision Wednesdayleft interest rates unchanged at a range of 5% to 5.25%, the highest level since 2007.
But policymakers also opened the door to additional rate increases this year, meaning there could be more pain for would-be homebuyers in the form of steeper mortgage rates.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
Homes in Rocklin, Calif., Dec. 6, 2022. (David Paul Morris/Bloomberg via Getty Images / Getty Images)
«It’s unclear that today’s pause will ease mortgage rates, even in the short term,» said Orphe Divounguy, a senior economist at Zillow Home Loans. «Without further evidence that core non-housing services inflation is easing, mortgage rates are likely to remain elevated. Despite today’s pause, Powell indicated that subsequent rate increases may be necessary.»
Fresh economic projections laid out after the meeting show that a majority of Fed officials who participated in the meeting expect rates to rise to 5.6% by the end of 2023, suggesting at least two more quarter-point increases this year.
«Given how far we have come, it may make sense for rates to move higher but at a more moderate pace,» Chair Jerome Powell told reporters at the post-meeting press conference. «It’s just the idea that we’re trying to get this right.»
Payne Capital Management President Ryan Payne and the Head of U.S. Rates Group for AmeriVet Securities Greg Faranello
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