Fed plans up to 3 interest rate hikes in 2022 to deal with high inflation

Fed officials also plan to step up the reduction in central bank bond purchases as they adjust their economic outlook to high inflation. (iStock)

The Federal Reserve will accelerate the reduction in its bond buying program and is forecasting up to three rate hikes in 2022, Fed Chairman Jerome Powell said at a press conference. press conference wednesday following the last Federal Open Market Committee (FOMC) meeting.

Federal Reserve rate hikes will cause interest rates to rise on a number of consumer loans, especially mortgage products. This means that the time to lock in record high interest rates on mortgage purchase and loan refinancing is running out.

If you’re considering refinancing your mortgage or borrowing a home loan, act now to take advantage of low rates before the Fed’s next rate hikes. You can see your estimated mortgage rate on Credible for free without impacting your credit score.

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The Fed steps up its tapering and plans 7 interest rate hikes in the coming years

During the coronavirus pandemic, the Federal Reserve increased his investment into government debt like treasury bills and mortgage-backed securities to stimulate the labor market, stimulate economic growth, and keep borrowing costs cheap for consumers. But amid fears of lingering inflation, Fed officials are now planning to cut bond purchases at an accelerated pace.

Inflation increases to the highest pace in nearly 40 years, according to the Bureau of Labor Statistics. So, despite signs of a “really strong economy,” Powell said that “bringing the end of our reduction by a few months is really the right thing to do” to deal with rising inflation.

However, the Fed has little control over the supply chain crisis, which has also contributed to inflation in recent months.

– Federal Reserve Chairman Jerome Powell

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The Fed also interest rates close to zero in recent years to support economic activity in the context of COVID-19. But the days of a low interest rate environment will soon come to an end. In addition to the three rate hikes the Fed has planned for 2022, it also expects two rate hikes in 2023 and 2024, for a total of up to seven rate hikes over the next few years.

“The actual rate decisions we make will depend on our evolving assessment of the forecast,” said Powell.

When the Fed raises its key rate, interest rates on consumer loans will also rise. This includes mortgage rates, which set records in early 2021 in part because of the Fed’s monetary policy.

With several rate hikes on the horizon next year, time is running out to get the mortgage rate down. Visit Credible at start the mortgage buying or refinancing process, so you can lock in a historically low rate before the next Fed rate hike.

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Inflation fears have already pushed up mortgage rates

Mortgage interest rates have trended higher in recent months since hitting record lows in January 2021, according to Mac Freddie Data. Although rates have increased during this time, they are still close to historic lows from the past 3 years.

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With the interest rate hikes anticipated by the Fed, mortgage rates are unlikely to drop anytime soon. Indeed, rates may rising trend over the next few years, especially after the Federal Reserve implements these rate hikes.

The latest forecasts from Mortgage Bankers Association (MBA) predicts that average 30-year mortgage rates will reach 4.0% in 2022 and 4.3% in 2023. MBA also indicates that mortgage origination activity could drop 33% next year due to rising mortgage interest rates.

If you’re considering buying a home or refinancing your current mortgage, it’s important to act quickly to lock in a mortgage rate before it inevitably increases. You can visit Credible for see your prequalified mortgage offers from several lenders to help you get the lowest possible rate for your financial situation.

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