Fed Minutes Suggest Rates Rise May…or May Not…Happen Soon

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After the minutes were released from The Fed’s July meeting (which occurred Wednesday), it was once again implied that nothing much would be happening in the immediate future. How one defines “immediate future” changes the meaning of that sentence, however, and only Janet Yellen and co. know exactly what they mean.

What we know for right now is that “some” of the Federal Open Market Committee felt that an increase in rates was necessary.

“Some members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation,” reads the minutes, perhaps providing an “a-ha” moment for those anticipating the rise.

Don’t get too excited, however. Just as in other moments this year when the board has seemed on the cusp of taking more dramatic action, they leaned conservatively, opting to wait for more data before making such a decision. Some analysts believe that expected influxes in said data will push back the “raise” option until later. Hiring is predicted to slow down in the coming months, which is likely to impact the unemployment rate, a measure that prevented a bump in rates earlier during 2016.

“It looks like they may be a little bit less hawkish than would have been expected,” said Gennadiy Goldberg, an interest rate strategist at TD Securities. “There does seem to an array of opinions at this meeting. The (Treasury yield) curve is steepening a little bit, so it’s probably less hawkish than the market was positioned for, that’s the initial thought.”

So, as it stands, it seems like The Fed is prepared to make changes…but who knows how long it will take for them to be satisfied by every number, including a combination of unemployment and inflation rates. The good news (if you’re The Fed) or bad news (if you’re hoping to grab a mortgage in the next six months) is that the group seems to feel comfortable once again in the wake of Brexit, and won’t allow that to influence a conservative approach anymore.

Some hawkish analysts have suggested a rise as soon as The Fed’s September 21-22 meeting, in just more than a month. That seems unlikely, considering the body’s timid behavior thus far. We agree that changes are imminent…but we define imminent as “early 2017.”

For now, enjoy average 30-year fixed rates in the 3.375 to 3.5 percent range.