Interest Rates

Interest Rates

December 16 - Well the Fed has finally been and gone and done it. The target Federal Funds Rate has been raised by 0.25%. This really ought not to have a major impact on mortgage rates,but what impact it does have is much more likely to cause them to rise rather than fall. This will make homes slightly less affordable, more so if the market reacts violently. Given how long this change has been signaled, it is hard to imagine how a violent reaction could be justified, but we always stand ready to be surprised.

The other impact to watch is how it affects foreign currency exchange rates. The Canadian Dollar has been particularly weak against the US dollar in the last week amid declining oil prices, and raising interest rates in the USA will probably continue to push the Loonie lower. This will be especially true if Canada moves towards negative interest rates as it has hinted as recently as last week.

The US economy looks plenty strong enough overall to withstand higher rates, but the outlook for producers of raw materials looks bleak. If you are in the energy business or supply equipment and services to those companies, you are likely to be facing serious job cuts. It is a great strength for Arizona that its economy is so diversified these days, including many businesses that actually benefit from lower raw material costs.

Dorothy Hovard Headshot
Phone: 480-204-5704
Dated: December 21st 2015
Views: 133
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