Federal Reserve makes no change in interest rates

Interest rates for buying a home on the Palos Verdes Peninsula remained level this week . The following are excerpts from the newsletter on interest rates published by HSH Associates :

"The vote to keep short-term interest rates unchanged by the Federal Reserve Open Market Committee was closer than it had been in about five years, but in the end, there was no change to monetary policy. The vote to hold the line was 7 to 3, with three for raising interest rates now rather than waiting.

The statement that closed the two-day meeting did contain an explicit warning about the future for short-term interest rates: "The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives." In humanspeak, this means that should the incoming economic data and data on inflation continue apace, markets should expect that a December policy move is coming. Currently, fed funds futures markets put the probability of a move at about 60 percent.

The Fed also released updates to its collective member projections for growth, inflation and the pace of changes to the federal funds rate over time. The group again marked down its expectations for the trajectory of these items, and perhaps most notably, the long-run rate of economic growth was pegged at a pretty anemic 1.8 percent level, and there were no expectations for growth to run a full annual rate above 2 percent in the next three and a half years.

As well, expectations for where the federal funds rate will be over the next few years was pulled down by a half-percentage point for 2018 and 2019 from projections as recently as June. Overall, it means that the Fed expects rates to be lower for longer... again."

The interest rate increase in place in the days before the Fed meeting has now been bled back out of the market. As we've noted at times, mortgage and interest-rate watchers should get used to seeing this kind of pattern, where rates edge higher into the meeting, and fall back again once it has concluded. If this year's patterns should hold, we may see a little "sweet spot" for mortgage and other interest rates in the weeks ahead, especially if the economic news shows little sign of acceleration. Expect mortgage rates to keep meandering in the coming week"

The following are interest rate quotes from American California Financial: