{"id":11118,"date":"2024-03-21T21:22:58","date_gmt":"2024-03-21T21:22:58","guid":{"rendered":"https:\/\/imsfund.com\/?p=11118"},"modified":"2024-03-21T21:22:58","modified_gmt":"2024-03-21T21:22:58","slug":"the-federal-reserve-leaves-rates-untouched-as-pressure-mounts-on-inflation","status":"publish","type":"post","link":"https:\/\/imsfund.com\/index.php\/2024\/03\/21\/the-federal-reserve-leaves-rates-untouched-as-pressure-mounts-on-inflation\/","title":{"rendered":"The Federal Reserve Leaves Rates Untouched as Pressure Mounts on Inflation"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div id=\"post-content\" :class=\"{ 'hidden': $store.proContent.showFullPrompt() }\">\n<section class=\"px-4 relative border border-slate-200 mobile-toc lg:hidden\" x-data=\"{open:false}\">\n<button x-on:click=\"open = !open\" class=\"flex items-center gap-4 my-2 border-none w-full\"><br \/>\n<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-6 w-6\" fill=\"none\" viewbox=\"0 0 24 24\" stroke=\"currentColor\" stroke-width=\"2\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" d=\"M4 8h16M4 16h16\"\/><\/svg><\/p>\n<p class=\"font-semibold text-slate-800 text-base m-0 js-toc-ignore\">In this article<\/p>\n<p><\/button><\/p>\n<\/section>\n<p><span data-preserver-spaces=\"true\">With inflation hovering\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.usinflationcalculator.com\/inflation\/current-inflation-rates\/#google_vignette\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">slightly north of 3%<\/span><\/a><span data-preserver-spaces=\"true\">, the Federal Reserve\u2019s meeting this week and its decision to leave interest rates where they are were seen by many as inevitable. Inflation has dropped dramatically since its post-pandemic high of 9.1% in 2022 after the Fed hiked up rates, bringing an overheated real estate market to a standstill.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">However, it\u2019s still proving a stubborn beast to tame, as the economy has remained resilient. Thus, leaving rates as they are\u2014the federal funds rate is currently at 5.5%\u2014is a hedge against inflation rising again should the Fed choose to lower rates later.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Is the Fed\u2019s desired 2% inflation rate doable? How long can a straining real estate market, desperate for oxygen, hold out? Those questions have undoubtedly been on the Fed\u2019s mind as it attempts to balance holding the line and stimulating the economy.<\/span><\/p>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Low Inventory Has Played a Role<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">The\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-153\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">lack of housing inventory<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0has undoubtedly influenced the Fed\u2019s decision to keep rates stagnant. Similar to what happened after the pandemic, lowering rates when there is little housing stock to go around is an explosive combination that causes sky-high price increases. Ditto for rent.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The lack of housing availability and affordability has seen many renters waiting on the sidelines for a break. The relatively low unemployment numbers\u2014which have lingered below 4% for the\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.commerce.gov\/news\/blog\/2023\/02\/news-unemployment-its-lowest-level-54-years#:~:text=Today,%20it%20is%20just%203.4,they%20were%20seven%20months%20ago.\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">longest period since the 1960s<\/span><\/a><span data-preserver-spaces=\"true\">\u2014have provided an uneasy equilibrium, allowing\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-a-landlord\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">landlords<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0who hold property financed at low interest rates to keep buildings rented at high rents while potential homeowners and investors stay put.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Dovetailing rate cuts with an impending building boom in Sun Belt cities that saw dramatic population growth could be a more pragmatic approach. Indeed, construction of new homes\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.cnn.com\/2024\/03\/19\/economy\/new-home-construction-february\/index.html\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">increased 5.9% last month<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0from a year earlier, boosting builder confidence.\u00a0<\/span><\/p>\n<div class=\"justify-center \" x-data=\"{ IabAdad_block_: popAd(['r720x90'], '1') }\" :class=\"IabAdad_block_.linkURL ? 'flex pt-8' : 'hidden'\">\n<a x-show=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.linkURL\" x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/the-federal-reserve-leaves-rates-untouched-as-pressure-mounts-on-inflation', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdClicked', 'blockAd', 'postContent')\" target=\"_blank\" x-init=\"&#10;      analytics.track('blockAdLoaded', {&#10;        referrer: 'https:\/\/www.biggerpockets.com\/blog\/the-federal-reserve-leaves-rates-untouched-as-pressure-mounts-on-inflation',&#10;        sponsor: IabAdad_block_.sponsor,&#10;        ad_title: IabAdad_block_.title,&#10;        ad_page_location: 'postContent'&#10;      })&#10;    \" x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/the-federal-reserve-leaves-rates-untouched-as-pressure-mounts-on-inflation', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdViewed', 'blockAd', 'postContent')\" rel=\"noopener\"><\/p>\n<div class=\" hidden sm:block\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r720x90\" :alt=\"IabAdad_block_.r720x90Alt\"\/>\n<\/div>\n<div class=\"block sm:hidden\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r320x50\" :alt=\"IabAdad_block_.r320x50Alt\"\/>\n<\/div>\n<p><\/a>\n<\/div>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">A Balancing Act<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">The Fed\u2019s challenge is to keep price growth bottled by leaving rates where they are without escalating unemployment, which would topple the economy into a recession. Although the Fed is supposed to be politically impartial, that would not be a good look in an election year.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Ironically, a contentious subject also tied to the election\u2014immigration\u2014could also play a role, as more workers put downward pressure on wage growth and thus slow inflation.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">\u201cMore people entering the country expands supply and demand,\u201d Matthew Bush, U.S. economist at Guggenheim Investments, told\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.nbcnews.com\/business\/economy\/interest-rates-when-will-they-come-down-march-2024-federal-reserve-rcna144066\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">NBC News<\/span><\/a><span data-preserver-spaces=\"true\">, saying what most politicians would not. Immigrants, he contended, have a higher tendency to be in the labor force. This means \u201cthe expanding supply pool of available workers is greater than increased demand for more workers. That increases economic growth, and you have a greater capacity to produce new goods and services.\u201d\u00a0<\/span><\/p>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Economy: A Hot Political Topic<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">There\u2019s no doubt that inflation and the Fed rate cut decisions are hot political topics, especially during an election year. The Fed doesn\u2019t want to be caught in the middle and certainly doesn\u2019t want to be accused of influencing the election one way or another, which it would be seen to do if it cuts rates too late.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In his State of the Union address, President Biden alluded to making it easier to build affordable housing, and while tax credits and access to loans will help, lower interest rates will be a massive boost in that area.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">\u201cAny political considerations align with their economic objectives,\u201d Bush told NBC. \u201cThe only thing is they might not want to start the rate-cut cycle in the months before the election cycle, so they\u2019d probably prefer to get started in June rather than September so it\u2019s not too close to the election.\u201d<\/span><\/p>\n<h3 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Mortgages<\/span><\/h3>\n<p><span data-preserver-spaces=\"true\">Although rates on 30-year fixed-rate mortgages don\u2019t match the Fed\u2019s benchmark, other loans, particularly those many investors opt for, such as\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/what-is-a-heloc\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">HELOCs<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0and adjustable-rate mortgages, align with the Fed\u2019s rates, usually mirroring them within two billing cycles.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">The average rate on a\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/heloc-vs-home-equity-loan\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">home equity loan<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0was 8.59% as of March 20,\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.bankrate.com\/home-equity\/current-interest-rates\/?zipCode=10025\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">according to Bankrate.com<\/span><\/a><span data-preserver-spaces=\"true\">, while the average HELOC was 8.99%.<\/span><\/p>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts\u00a0<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">For homebuyers and investors, high rates for the last two years have been painful, and while many people have tried to spin 7% to 8% rates as normal within a historical context, to see interest rates double within two years without increased wages softening the blow has put a massive dent into people\u2019s financial lives.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">It seems like there will at least be some sort of rate cut before the end of the year, but it won\u2019t be substantive. Yes, they will allow a little wiggle room for mortgage approvals but don\u2019t dream of 3- 4% interest rates again\u2014no matter who is sitting in the White House in January 2025.<\/span><\/p>\n<div id=\"visibility-group-block_64dd56548a48e\" class=\"visibility-group  hidden\">\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-theme-gold-light-background-color has-text-color has-theme-gold-color\">\n<div class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 w-full \">\n<main class=\"py-4\"><\/p>\n<p class=\"has-theme-gold-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Get the Best Funding<\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">Quickly find and compare investor-friendly lenders who specialize in your unique investing strategy. It\u2019s fast, free, and easier than ever!<\/p>\n<p><\/main>\n<\/div>\n<div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n<img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  shadow-xl rounded-md hidden lg:block\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/08\/Lender-Match.png\" alt=\"find a lender with lender match\" title=\"The Federal Reserve Leaves Rates Untouched as Pressure Mounts on Inflation 2\"\/>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"wp-block-group is-layout-constrained wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-group__inner-container\">\n<div class=\"wp-block-group__inner-container\">\n<div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n<div class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n<div class=\"relative z-30 w-full \">\n<main class=\"py-4\"><\/p>\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n<p><\/main>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"italic\"><b>Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n<\/div>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.biggerpockets.com\/blog\/the-federal-reserve-leaves-rates-untouched-as-pressure-mounts-on-inflation\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this article With inflation hovering\u00a0slightly north of 3%, the Federal Reserve\u2019s meeting this week and its decision to leave interest rates where they are were seen by many as inevitable. Inflation has dropped dramatically since its post-pandemic high of 9.1% in 2022 after the Fed hiked up rates, bringing an overheated real estate market [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":11119,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/federalreserve-1024x517.jpg","fifu_image_alt":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-11118","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/11118","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/comments?post=11118"}],"version-history":[{"count":1,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/11118\/revisions"}],"predecessor-version":[{"id":11120,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/11118\/revisions\/11120"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media\/11119"}],"wp:attachment":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media?parent=11118"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/categories?post=11118"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/tags?post=11118"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}