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The Federal Reserve announced a rate hike between 1.5 percent and 1.75 percent, possibly pushing mortgage rates as high as 5 percent by the end of 2018.
Economists Predict Three Adjustments in 2018
Economists predict the move will be the first of likely three adjustments throughout the year. During the Central Bank’s two-day Open Market Committee meeting, the Federal Reserve called for a 25-basis-point increase and a federal funds rate of 1.63 percent—what banks charge each other for overnight loans.
Inman’s Jotham Sederstrom reported the new benchmark rate is the highest since September 2008, near the beginning of the housing crisis.
The Federal Reserve is optimistic about the economy growing in 2018.
“Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate,” according to a statement issued by the Federal Reserve on March 21. “Job gains have been strong in recent months, and the unemployment rate has stayed low.”
Consumer and Business Borrowing Costs to Increase
The move is expected to ripple through the economy, raising consumer and business borrowing costs, especially for variable-rate loans such as adjustable-rate mortgages and credit cards, according to an article by Paul Davidson on USA Today.