Fed Rate Bump

Today’s leading financial stories are: a) the Federal Reserve’s apparently surprise decision to raise interest rates on short-term bank borrowing; and b) the market’s reaction to same (playing out now).

My take?

The action itself is relatively trivial: hiking rates on some arcane, overnight interest rate from .5% to .75% (yes, that’s less than 1%) does not suddenly make money expensive (the same rates have been as high as 6%(!) in recent years, before “the deluge”).

Clearly, then, the concern is that there are more increases to follow.

Given the hair-trigger nature of today’s markets (“Explanation for Jumpy Markets“), you’d expect traders to overreact to the news — like they now do to all news — then settle down rather quickly.

As far as mortgage rates go, what the Federal Reserve and Treasury are doing (or not) with respect to funding Freddie Mac, Fannie Mae, FHA are much more significant than a trivial bump in banks’ overnight borrowing costs.
About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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