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Hawkish Fed Statement Could Mean Higher Rates in the Near Future

The Federal Reserve issued a hawkish Federal Open Market Committee (FOMC) statement on July 29th with only subtle changes to its forward guidance. While mortgage rates, futures on Fed Funds, and the ten-year yield (currently at 2.27%) are unchanged, the FOMC statement may hint that a rate hike is coming in September – or at least that the Fed is moving in that direction.

As it stands now, the Fed is looking to see “some further” improvement; the implication being that the economic data is nearing the targets the Fed wants to hit before making rate changes. The statement notes that the economy has seen moderate expansion over the course of the past few months with growth in both the housing sector and in household spending. The biggest change has been a brighter outlook for the job market. Since June, the “labor market [has] continued to improve, with solid job gains and declining unemployment.”

With the economy ticking upward, the question then becomes: At what point will economic indicators be strong enough for an increase in rates? You never want to make a housing decision based solely on where rates are heading, but now may be the time to buy if you are looking to avoid a rate hike.