LIVE: It’s FED Day! Fed increases rates by a half point.

6:49 a.m. Well… it’s kind of a live post – I will be updating this post throughout the day. This morning, all eyes are on the FOMC (aka “the Fed”) as we wait to learn how much the Fed funds rate will be adjusted. It is anticipated that the Fed will push the rate 0.500% higher today. This will directly impact loans that are attached to the Prime interest rate, such as home equity loans and many credit cards with variable rates.

Mortgage interest rates are influenced by the actions the Fed takes today. Mortgage interest rates are based on mortgage-backed securities (bonds). So if the Fed decides to hike rates to 0.75% instead of the anticipated half point increase, we will most likely see interest rates spike as this indicates that inflation is not in control. However, if the Fed increases the rate by the highly anticipated half point (or less, which I don’t think will happen), we should see mortgage rates improve immediately as this is indicates that inflation is getting under control. Inflation drives mortgage rates higher since mortgage rates are based on bonds.

Fed Chair Powell will be letting us know around 11:00 am PST how much the fed funds rate will be raised this time as their two-day FOMC meeting wraps up. It’s not only how much the fed funds interest rate is adjusted that people will be looking for, the commentary when the rate is released and follow up speech from Powell will also be dissected for data on inflation.

As I wrap up this installment of today’s live post (7:10 am), MBS (mortgage backed securities: UMBS 30-YR 5%) are up 19 basis points from yesterday. Stay tuned!

11:07 AM: As expected, the Fed raised the funds rate by 0.5 percentage points. The Fed Funds rate is now 4.500%. Currently the reaction is “meh” as this was very expected. MBS is actually down 9 basis points from this morning (as I write this).

From the press release: “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.”  Expect HELOC and credit card interest rates based on the prime rate to continue to rise next year.

Powell is due in a few minutes to elaborate. This may also move markets and mortgage interest rates.

12:22 PM: No big surprises with Powells comments. Mortgage-backed securities are up around 19 basis points.

2:45 PM: MBS (UMBS 30YR 5%) closed up 28% today. Check out the movement with mortgage-backed securities from today.  You can see the first dip around 11:00 am following the rate announcement and another dip lower during Powell’s press conference. Markets seemed to absorb everything pretty well.

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