FOMC Increases Interest Rates; MBA’s Mike Fratantoni Reacts

The Federal Open Markets Committee Sept. 16 increased interest rates by 0.25%, setting the target range for the federal funds rate to 3.75-4%.

The hike is the first since July 2023.

“The most recent inflation data remain well above the Fed’s 2% target, and consumer expectations about future inflation have increased, indicating that the pickup in inflation is likely to persist,” said MBA SVP and Chief Economist Mike Fratantoni. “The September round of projections from FOMC members showed similar expectations for economic growth and the unemployment rate, but a somewhat higher path for inflation and a higher path for the fed funds rate target than had been previously indicated.”

“Longer-term rates, including mortgage rates, had already baked in the expectation of hikes at this and future meetings. Thus, longer-term rates have not moved much in response to this news,” he continued. “Housing and mortgage activity slowed abruptly as mortgage rates moved higher over the past several weeks. MBA forecasts two additional hikes from the Fed over the next year and expects mortgage rates to stay near current levels over the forecast horizon.”

Click here or see the FOMC’s full statement below:

The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote:

The Committee decided to raise the target range for the federal funds rate by 1/4 percentage point to 3-3/4 to 4%, in support of the Federal Reserve’s dual mandate. The Committee is continuing its policy of maintaining ample reserves in the banking system.

Economic activity is expanding at a solid pace. While uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient. Productivity growth is strong, and capital investment is robust. Job gains have kept pace with the workforce, and the unemployment rate has changed little.

Inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2% goal. The Committee will deliver price stability.