Could the removal of one word mean that mortgage rates are set to increase in 2015?
Believe it or not, the future of mortgage rates in the U.S. housing market could hinge on a single word.
Back in December, we wrote that the best indication of Federal Reserve policy came from the regulatory body’s statements, specifically the words it used in regards to certain sectors of the economy.
Fast forward to this week, and Fed Chairwoman Janet Yellen has signaled that she and the Fed are considering an increase to interest rates this summer. The indicator? She removed the word “patient” from the Fed’s statement on how it will behave in regards to raising interest rates.
It may seem silly to obsess over Fed verbiage to such a degree, but analysts are interpreting the omission of “patient” – along with the nation’s falling unemployment rate – as a sure sign that the Fed will consider increasing interest rates at its first summer meeting, which will take place June 16 and 17.
Removing Patient Does Not Mean “Impatient”
Granted, Yellen was very deliberate in her comments following the Fed’s meeting, stating that removing the word “patient” in no way indicated the Fed would dramatically increase rates this year.
“Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” Yellen said.
And an interest rate increase in June is not yet a sure thing. Global economic uncertainty (particularly in Europe and China) continue to cloud the Fed’s decision-making process, so if anything, we can anticipate a cautious approach to interest rates, one that would see the Fed increasing them incrementally in the coming years.
So, will interest rates go up this year? As before, our answer remains the same – possibly probably most definitely?