Rates are going to head higher next week - consider this:

posted by Brian Mudd - 

Rates are going to head higher next week - consider this:

Bottom Line: Based on improved economic activity in the early going in 2017, it was already likely that the Federal Reserve would raise rates in their meeting next week. As was indicated prior to entering the new year, the Federal Reserve intends to raise rates three times this year if all goes according to plan. Well, not only is all going according to plan. All economic indicators thus far are going far better than the plan. In other words, three rate increases might be the minimum we should expect this year and there might even be more if the current economic trajectory continues.

The current economic modeling suggests a 91% chance of the Federal Reserve raising rates next week. That should take the Fed funds rate (what the fed charges banks/lenders to use money they loan to you) from .5% to .75%. Here's the thing to consider. The average historic fed funds rate is 4%. The average US economic growth rate is 3.2%. The last year we had 3%+ economic growth for a full year was 2005. The average federal funds rate was...yep 4%. That's what you should consider at this point. If we really are in the process of getting back to a normal, healthy, US economy for the first time in 12 years, rates are heading higher and potentially could end up at a level that's 3%+ higher than where we are right now over the next couple of years. For all of these reasons, you really should be evaluating all longer term financing that you want/can have in place. 

Rates are heading higher next week and even then we may be just getting started.

Brian Mudd

Brian Mudd

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