A Slowing of Rate Increases, Finally?

The sequence of four straight hikes of 75 basis points (.75%) in a row was capped last Wednesday Dec 14 by a rate hike of 50 basis points (.5%), all in an effort to cap inflation.  Federal Reserve Chair Jerome Powell recognize the stress of these rate hikes, and continues to promise to be vigilant in fighting inflation, but it perhaps has been having the opposite effect.

"Indeed, the statement released by the FOMC pointed to “ongoing increases in the target range” in order to bring inflation back to the Fed’s 2% target. New economic projections issued Wednesday by the central bank revealed that officials now anticipate inflation to close this year at 4.8%, gradually dwindling back to 3.5% in 2023 and falling to 2.5% in 2024."  The Fed's policy rate is now at 4.5%, the highest since 2007.  https://www.scotsmanguide.com/browse/content/fed-finally-backs-off-of-75basispoint-hikes-with-december-rate-increase

However, the federal funds rate and mortgage rates sometimes move in opposite directions, such as in early December when mortgage rates fell in response to declining inflation.  "Although there's merely an indirect link between mortgage rates and the federal funds rate, the Fed does have a direct influence on the rates charged on home equity lines of credit, which typically have adjustable rates." https://www.nerdwallet.com/article/mortgages/fed-mortgage-rates

California Association of Realtors, in its October prediction for 2023, was somewhat stark in its prediction of the market and the economic factors affecting housing for 2023:

Inflation will not return to pre-pandemic levels until 2024; interest rates will surge again; home sales will dip as costs of borrowing rise; housing affordability will be in the headwinds in 2023, but home prices will not fall as they did in 2009 era.
 

Julia Huntsman, REALTOR, Broker | http://www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996