Via Just The News:
Mortgage rates surpassed 4% for the first time since 2019 and the Federal Reserve announced a series of new rate hikes this week, two major shifts that mark the economic response to months of elevated inflation.
The Federal Reserve announced a 0.25% interest rate hike and said six more increases are on the way. Last week’s increase is meant to rein in inflation, but can have negative effects on economic growth. Meanwhile, mortgage rates are expected to increase along with the Federal Reserve rate.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong,” the Federal Reserve said in its rate hike announcement.
”In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.”
The Federal Reserve justified the hike by saying the job market had reached a sufficient level.
“Indicators of economic activity and employment have continued to strengthen,” the Federal Reserve said. “Job gains have been strong in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.”
Those mortgage rates will make it harder for Americans to afford homes, even as house prices soar.
“Housing sales slip over 7% in February,” said Elizabeth Kreiselmaier, one of many Republican Congressional candidates running on economic problems, which are expected to help hand Republicans hefty wins in November.
Congressional Republicans currently hold a double digit lead on the generic ballot against Democrats.
“Mortgage rates are on the rise, as household savings are reduced by inflation, making it more difficult for first time buyers,” Kreiselmaier said. “This is the direct result of failed Biden/Kilmer economic policies.”
Critics say the latest federal spending spree of several trillion dollars, led by President Joe Biden, is to blame.
“This is the epitome of how big government policies go awry and hurt the little guy,” said Jonathan Williams, the chief economist at the American Legislative Exchange Council. “The Biden administration’s trillion-dollar spending increases are directly responsible for inflation and thus the rising mortgage interest rates which are making it harder for hard-working Americans to buy a home.
“The Federal Reserve raises interest rates in an attempt to bring down the high inflation, which is the product of the federal government’s overspending,” he added. “Anytime Congress essentially prints money it leads to inflation.”
Williams said correcting federal spending is the long-term solution.
“For everyone who liked their so-called free government money over the past two years, this is the result: inflation, and now, higher interest rates,” he said. “The policy solution is for the federal government to adopt a meaningful balanced budget amendment, just as 49 of our 50 states have already done. If designed correctly, this would prevent the federal government from overspending, which inevitably leads to a disastrous cycle of inflation and high interest rates. We need our policymakers in Washington to look to the states, the laboratories of democracy, for policy solutions that work for everyday Americans.”
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