The Fed’s commentary on interest rates sent 30-year fixed mortgage rates up to 3.25% on Thursday, their highest level since mid-April.
The Dow Jones Industrial Average suffered its worst week since January as the Federal Reserve shortened its projected timeline for interest rate hikes. On Wednesday, the Fed maintained near-zero interest rates and its $120 billion monthly asset purchase program, but suggested two potential interest rate hikes in 2023. The Fed also raised its projected 2021 inflation estimate from 2.4% to 3.4%, but it has previously said elevated inflation levels in 2021 will be “transitory.” On Friday, St. Louis Fed President James Bullard said he believes inflation will trigger an interest rate hike in 2022. Bullard said strong economic growth and a recovering labor market are good news, but the Fed has observed “more inflation than we were expecting” and has now officially opened talk of tapering.
