Chicago's Mortgage Choice - June 26, 2018 Real Estate Report - The Fed's Strong Message

We now have had some time to decipher the Federal Reserve Board's statement after their meeting last week. The tone of the message can be described as hawkish. The Fed used words that were a bit stronger with regard to the economy and the future of interest rates. For example, economic growth was described as solid, rather than moderate as in their previous missives. This growth is being supported by a pick-up in household spending and a decline in unemployment. Though they are still using the term "gradual increases" to describe their rate hikes, the statement pointed to the members' opinion that two more rate increases were in the cards for this year. In other words, the pace of gradual increases seems to be accelerating. The Fed no longer is worried that inflation is below their 2.0% target rate because inflation is now close to their short-term target and the focus appears to be shifting on the side of keeping inflation from moving higher from here. While the markets seem to find the path ahead inevitable, we must remind our readers that there is always the possibility of intervening events which could cause the Fed to change their course. In the past we have seen natural disasters, political upheaval, strikes, terrorist incidents and more. We can't foresee any of these and everyone hopes they don't happen. However, we need to understand that predictions are just that. No one can ordain the future. And that is what makes the markets and life interesting. Keith Stewart - 773-529-7000

Chicago's Mortgage Choice - June 19, 2018 Real Estate Report - The Fed's Announcement

As expected, the Federal Reserve Board's Open Market Committee met last week and announced that they would be raising short-term rates by 0.25%. Since the move was anticipated, there was no major reaction by the markets, excepting for the usual increase in rates in anticipation of the decision and subsequently a little easing as the meeting grew closer. This was the seventh time the Fed had raised rates by 0.25% in the past three years during their period of rate "normalization" from the historic lows of the recession and slow recovery. The big concern for the markets was the statement which accompanied the announcement. As usual, the markets were looking for an assessment of the economy, as well as hints of the pace of future rate increases this year. It seems that the members of the committee are ready to continue increasing rates as much as two more times this year. Some were searching for a hint that rates are coming close to what the Fed considers a normalized level, but that was nowhere to be found. As we have discussed previously, it is an open question where that level is located. When the Fed defines that level, then we will have a better idea of where rates will eventually settle if the economy does not falter. There was one more important meeting last week. This was the summit with North Korea. Though it was not expected that any breakthroughs were to come from this meeting, it was expected that a positive process would begin. Certainly, the statements made after the meeting were quite hopeful and the meeting itself was a breakthrough. Between international trade and other tensions in the spotlight this year, there has been a lot of caution in the markets contributing to the volatility we have seen. Any easing of tensions could be helpful in this regard. Keith Stewart 773-529-7000