U.S. federal reserve

The Final 0.75% Rate Hike?

US Fed just voted for the forth 0.75% rate hike in a row to bring the federal funds rate to a notch below 4%!  The question is – will there be a fifth jumbo-sized hike in its last meeting for the year on 13-14 December? 

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Let’s recap.  Fed is on an unprecedented fastest tightening cycle this year with rate hikes as follows: Mar (0.25%), May (0.50%), Jun (0.75%), Jul (0.75%), Sep (0.75%), Nov (0.75%), Dec (?).  Note there’s no FOMC scheduled for the month of August and October.  The total increase in fed funds rate this year has been close to 400 basis points or 4% bringing it from near zero at the start of the year to a range now between 3.75-4.00%.  

The market initially cheered the Fed statement as it alluded to a slowdown in tightening with the Fed recognizing the lag of monetary action on economic activities and inflation.  However, cheers turned to jeers during the press conference when Fed Chair Jerome Powell made the unequivocal call that “we still have some ways to go” (referring to tightening) and that incoming data suggests that the “ultimate level of interest rates will be higher than previously expected”.

From our perspective, there’s no need to read too much into Fed meeting outcomes during this period.  It will change with incoming data every month.  And that data – with two more US inflation prints to be released before the final FOMC meeting for the year (on 10 Nov and 13 Dec) – has the most influence on the course of monetary policy in the coming months.  So, work with us as we help clients to navigate through interest rate cycles successfully through the years since 2014.

By any measure, a 4% increase in interest within a year is already unbelievable.  Yet Fed is not going to stop until inflation drops consistently and considerably.  So, the biggest question now is will Fed close the year with a fifth jumbo-sized 0.75% rate increase in December or show signs of slowing hikes by reducing to 0.50% or even 0.25%.  And you know where to look for answers to that – inflation data.

We’ve been saying for the longest time now – it’s no longer about how high it gets to, but how long it stays up there.  Remember that as well when you contract your mortgage rate with the bank be it repricing or refinancing – it’s not what rate you sign but how long you wish to stay committed to that rate.  Speak to us to find out our unique strategy how you can still win in mortgage planning over the longer term. 

Compare Singapore home loan rates quick and fuss-free at MortgageWise.sg.  Work with the team who can bring value to you at all five levels including our expert viewpoints & forecasts which helps you to navigate interest rate cycle astutely be it for residential or commercial property loan. Work with us today and help support our social cause too!

Remember that when you contract your mortgage rate with the bank be it repricing or refinancing – it’s not what rate you sign but how long you wish to stay committed to that rate.

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