Fed Lifts Rates, US Dollar Weakens

US dollar firm on Fed outlook

How Fed hike will affect mortgages, car loans, credit cards

The Fed voted to raise the rate with only one detractor, the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari.

"We do not have a high-inflation threat right around the corner", Kashkari said during an interview on Bloomberg Television Monday, adding that the lack of price pressure affords the Fed patience in raising rates.

The unchanged outlook for rate hikes this year offset concerns that the Fed intends to accelerate the pace of rate increases.

That implies all seven members of the Board of Governors in Washington, including Chair Janet Yellen, Vice Chair Stanley Fischer and New York Fed chief William Dudley, have also probably forecast three increases in 2017. "Even economists who, of all people, should know better".

This means, though, that consumers who have credit card card or adjustable-rate mortgages or home equity lines of credit are those who will be most likely hit by the rate hike.

"The unemployment rate has been stuck around 4.7 percent". If inflation began to pick up, that would certainly solidify (that expectation).

This might seem daunting, at first, but NerdWallet mortgage analyst Tim Manni confides: "For consumers now shopping for a mortgage to purchase a property or refinance an existing loan, shouldn't feel like a real shock to the system since the rate move has already been "baked" into the market". The Fed's preferred gauge of price pressures, excluding food and energy, rose 1.7 percent in the 12 months through January, still a bit shy of its 2 percent goal. "And while it is likely the announcement of that plan will not trigger much of a market response, we don't know that for certain".

Variable-rate mortgage borrowers were less concerned about any immediate impact from the Fed's statement last week, but they too can take some comfort from the Fed's mostly dovish statement because the USA dollar sold off following the Fed's announcement. Indeed, McBride comments, "Borrowers with adjustable rate mortgages that are seeing their rates reset should brace for higher payments". If you are looking to refinance, you should be able to find five-year variable rates in the prime minus 0.45% range (2.25% today), depending on the terms and conditions that are important to you.

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