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By G. Steven Bray
If you’re still floating your interest rate, you may be kicking yourself this week. Mortgage rates have risen 1/8% in the last week. While rates still are very low by historical standards, they’ve been fairly stable lately, making the rise seem rather abrupt.
Last week I recommended caution if you’re watching rates, and I’ll reiterate that this week. I don’t believe the forces pushing rates higher have subsided just yet. Sentiment still seems frothy, which negates the effects of factors that would limit rate increases, such as persistently low inflation.
In addition, we’ve added a couple other factors that seemingly work against lower rates. First is the nomination for Chair of the Federal Reserve. Trump is said to be seriously considering two individuals: John Taylor and Jay Powell. Markets consider Taylor to be less friendly towards low rates. Trump said he is “very, very close” to deciding, and it was reported he asked senators at lunch Tues if they approved of Taylor. The response from senators was positive, and markets took notice.
The second factor is a pending announcement from the European Central Bank. The ECB previously promised it would let us know about its plans to taper its bond buying program after tomorrow’s meeting. ECB bond buying is akin to the Fed’s quantitative easing, which led to record low interest rates. It’s not certain what if anything the ECB will announce, but markets are hedging for the worst.
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