Fed raises rates again

KingPriest2 · 05-10-2006, 01:15 PM

Fed raises rates again
Central bank boosts key short-term rate to 5%, says further hikes 'may yet be needed' depending on economic reports.
May 10, 2006: 2:40 PM EDT

NEW YORK (CNNMoney.com) - The Federal Reserve raised its short-term interest rate target another quarter of a percentage point Wednesday - the 16th straight time that the central bank has raised rates.

The Fed's policy-making committee added in its statement that it may need to keep raising rates but that the timing of the increases will depend on economic data.

"Some further policy firming may yet be needed to address inflation risks but ... the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the Fed said in its statement. (To read the statement, click here.)

The central bank's fed funds rate now stands at 5 percent, the highest since March 2001. Short-term rates were at historical lows when the Fed began its rate-hiking campaign in June 2004.

The fed funds rate, an overnight bank lending rate, affects the rates consumers pay on credit cards, auto loans, home equity lines of credit and other types of debt.

The Fed has been raising rates in a bid to keep inflation at bay. But despite concerns about rising energy prices, as well as signs that the economy is still healthy, there is a growing feeling among some economists and investors that the Fed risks hurting economic growth if it keeps boosting rates.

In its statement, the Fed said that "economic growth has been quite strong so far this year" but that growth "was likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices."

Fed Chairman Ben Bernanke made similar comments about the economy last month in remarks to the Joint Economic Committee of Congress. During that testimony, Bernanke also hinted that the Fed could soon pause to judge the impact of the Fed's previous interest rate hikes.

The Fed's next policy meeting is on June 28 and 29. According to rate futures on the Chicago Board of Trade, investors are pricing in a 38 percent chance of another quarter-point hike at that meeting.

Stocks, which traded lower just before the Fed announcement, bounced briefly but then reverted to modest losses. Bonds fell, pushing the yield on the 10-year U.S. Treasury up to 5.13 percent. Bond prices and yields move in opposite directions.

**penguinz** · 05-10-2006, 01:46 PM

Just in time for me to refinance.

KingPriest2 · 05-10-2006, 02:03 PM

Quote:

Originally Posted by penguinz

Just in time for me to refinance.

It has nothing to do with mortgage rates.

**Donger** · 05-10-2006, 02:10 PM

Quote:

Originally Posted by KingPriest2

It has nothing to do with mortgage rates.

What?

Calcountry · 05-10-2006, 02:43 PM

Duh, Gold is almost at an all time high; oil has trippled in 18 months; median home prices have doubled in the last 5 years. Add to this all the spending to finance a war.

Yet, the past 6 months on CNBC, there is virtually no one saying that the inflation genie has been let out of the bottle, because if they preach inflation, it would just make it even worse as people start changing their behavior to mitigate or take advantage of an inflationary environment.

Well let me tell you, with all that my education is worth, 50 cents and a cup of coffee, ITS BAAAACK.

This is the 70's all over again.

KingPriest2 · 05-10-2006, 02:44 PM

Quote:

Originally Posted by Donger

What?

Whenever the Fed changes interest rates it really does not affect mortgage rates

The 10 year bond is a far better indicator

KingPriest2 · 05-10-2006, 02:47 PM

Quote:

Originally Posted by Donger

What?

If there is any change it is long term.

it takes awhile for it to affect them.

Calcountry · 05-10-2006, 02:49 PM

Quote:

Originally Posted by KingPriest2

Whenever the Fed changes interest rates it really does not affect mortgage rates

The 10 year bond is a far better indicator

Nonsense. Immediately banks change their prime lending rate, and everything that is pegged to that benchmark follows suit.

As soon as those other products change the supply of cash available for long term fixed loan vehicles, the prices of the bonds goes down, this axiomatically leads to higher yields.

KingPriest2 · 05-10-2006, 02:50 PM

Quote:

Originally Posted by bunnytrdr

Nonsense. Immediately banks change their prime lending rate, and everything that is pegged to that benchmark follows suit.

As soon as those other products change the supply of cash available for long term fixed loan vehicles, the prices of the bonds goes down, this axiomatically leads to higher yields.

I have a finance degree and been a mortgage broker for over 6 years now.

I have researched and stayed on top of it.

The FEd rate does not directly affect mortgage rates

vailpass · 05-10-2006, 02:54 PM

Quote:

Originally Posted by KingPriest2

I have a finance degree and been a mortgage broker for over 6 years now.

I have researched and stayed on top of it.

The FEd rate does not directly affect mortgage rates

Keep preaching it. All the mortgage "professionals" are getting a little nervous now that the end of the boom is in sight.

KingPriest2 · 05-10-2006, 02:56 PM

Mortgage rates go down Fed rates go up

KingPriest2 · 05-10-2006, 02:57 PM

Quote:

Originally Posted by vailpass

Keep preaching it. All the mortgage "professionals" are getting a little nervous now that the end of the boom is in sight.

There are always people wanting to buy homes there are always people in BK paying it off, There are always people who have collections and the only way to pay it off it to refi. There are always people who are remodeling their homes.

KingPriest2 · 05-10-2006, 03:00 PM

Quote:

Originally Posted by bunnytrdr

Nonsense. Immediately banks change their prime lending rate, and everything that is pegged to that benchmark follows suit.

As soon as those other products change the supply of cash available for long term fixed loan vehicles, the prices of the bonds goes down, this axiomatically leads to higher yields.

Daily Market Commentary

Last Updated: 5/10/2006

WEDNESDAY AFTERNOON UPDATE:

Today's FOMC meeting adjourned with an announcement of another quarter point increase to key short-term interest rates. This was the sixteenth consecutive increase but was expected and has not affected mortgage rates or bond trading much. However, the post-meeting statement did lead to inflationary fears and initially, selling in the financial markets.
.

The Dow has rebounded from the initial selling, currently standing up 20 points, while the Nasdaq remains down 12 points. The bond market has given back its earlier gains, currently standing +1/32. This will likely lead to many lenders revising rates higher this afternoon by approximately .125 of a discount point.

Tomorrow morning will brings us the first piece of important economic news. April's Retail Sales data will be posted at 8:30 AM. This is an extremely important report for the financial markets as it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, this data can have a pretty significant impact on the markets. Current forecasts are calling for an increase in sales of approximately 0.8%. A smaller than expected increase should push bond prices higher and mortgage rates lower. However, a larger increase could fuel bond selling and lead to higher mortgage rates early tomorrow.

If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days...
Lock if my closing were taking place between 8 and 20 days...
Float if my closing were taking place between 21 and 60 days...
Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

chiefsfaninNC · 05-10-2006, 03:02 PM

I am building my home. I close on the construction loan in two weeks. Talked to my banker today. She said expect rates to go up next week.

KingPriest2 · 05-10-2006, 03:28 PM

Quote:

Originally Posted by chiefsfaninNC

I am building my home. I close on the construction loan in two weeks. Talked to my banker today. She said expect rates to go up next week.

No one knows what rates are going to do next week.

05-10-2006, 01:15 PM
KingPriest2 Super Grover Join Date: Oct 2002 Location: KCMO Casino cash: $8635135	Fed raises rates again Fed raises rates again Central bank boosts key short-term rate to 5%, says further hikes 'may yet be needed' depending on economic reports. May 10, 2006: 2:40 PM EDT NEW YORK (CNNMoney.com) - The Federal Reserve raised its short-term interest rate target another quarter of a percentage point Wednesday - the 16th straight time that the central bank has raised rates. The Fed's policy-making committee added in its statement that it may need to keep raising rates but that the timing of the increases will depend on economic data. "Some further policy firming may yet be needed to address inflation risks but ... the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information," the Fed said in its statement. (To read the statement, click here.) The central bank's fed funds rate now stands at 5 percent, the highest since March 2001. Short-term rates were at historical lows when the Fed began its rate-hiking campaign in June 2004. The fed funds rate, an overnight bank lending rate, affects the rates consumers pay on credit cards, auto loans, home equity lines of credit and other types of debt. The Fed has been raising rates in a bid to keep inflation at bay. But despite concerns about rising energy prices, as well as signs that the economy is still healthy, there is a growing feeling among some economists and investors that the Fed risks hurting economic growth if it keeps boosting rates. In its statement, the Fed said that "economic growth has been quite strong so far this year" but that growth "was likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices." Fed Chairman Ben Bernanke made similar comments about the economy last month in remarks to the Joint Economic Committee of Congress. During that testimony, Bernanke also hinted that the Fed could soon pause to judge the impact of the Fed's previous interest rate hikes. The Fed's next policy meeting is on June 28 and 29. According to rate futures on the Chicago Board of Trade, investors are pricing in a 38 percent chance of another quarter-point hike at that meeting. Stocks, which traded lower just before the Fed announcement, bounced briefly but then reverted to modest losses. Bonds fell, pushing the yield on the 10-year U.S. Treasury up to 5.13 percent. Bond prices and yields move in opposite directions.
Posts: 6,434

05-10-2006, 01:46 PM	#2
penguinz Supporter Join Date: Mar 2003 Casino cash: $727626	Just in time for me to refinance. __________________
Posts: 17,249

05-10-2006, 02:43 PM	#5
Calcountry Shoot the tube Join Date: Oct 2003 Casino cash: $7527870	Duh, Gold is almost at an all time high; oil has trippled in 18 months; median home prices have doubled in the last 5 years. Add to this all the spending to finance a war. Yet, the past 6 months on CNBC, there is virtually no one saying that the inflation genie has been let out of the bottle, because if they preach inflation, it would just make it even worse as people start changing their behavior to mitigate or take advantage of an inflationary environment. Well let me tell you, with all that my education is worth, 50 cents and a cup of coffee, ITS BAAAACK. This is the 70's all over again. __________________
Posts: 29,479

05-10-2006, 02:56 PM	#11
KingPriest2 Super Grover Join Date: Oct 2002 Location: KCMO Casino cash: $8635135	Mortgage rates go down Fed rates go up Attached Thumbnails __________________ Quote: ---------------------------------------------------------------------- Originally Posted by Taco John If you're not sure who you're voting for at this point in time, you can abandon all connection to the word "smart." ---------------------------------------------------------------------- Quote: ---------------------------------------------------------------------- Originally Posted by Taco John ...He asked who I am voting for. I told him, "well, that depends... ."
Posts: 6,434

05-10-2006, 03:02 PM	#14
chiefsfaninNC Starter Join Date: Sep 2005 Location: Greensboro NC Casino cash: $10004900	I am building my home. I close on the construction loan in two weeks. Talked to my banker today. She said expect rates to go up next week.
Posts: 941