Inman Select: What does Federal Reserve rate hike announcement mean?

Following the Federal Reserve’s announcement of its third hike of short-term interest rates in the last seven months, NAR Chief Economist Lawrence Yun, the Federal Open Market Committee and a real estate economist shared their thoughts for Inman Select.

The Federal Open Market Committee raised short-term interest rates .25 percent because of a strengthening labor market and low interest rates, Inman Select reported.

“The latest rate hike is partly justified from ongoing economic expansion and also a steadily falling unemployment rate,” said Yun. “However, the Federal Reserve should be mindful of the lower than expected rate of inflation and the consequent low interest rates on long-dated bonds, like 10-year Treasury and 30-year mortgage rates. An inversion in interest rates of short-term fed funds being higher than long-term bond yields can easily pull down the economy into a recession. We are getting closer to that inversion point.”

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