mortgage

Interest rate forecast for 2016

Interest rates to climb
Previous
1 of 7
Next
Interest rates to climb © aphaspirit/Shutterstock.com

Interest rates to climb

The Federal Reserve doesn't directly set interest rates for mortgages, auto loans, credit cards of other types of consumer financing. But smart borrowers watch the Fed's actions and statements for clues as to the general direction of rates.

In mid-December, the Fed raised its benchmark federal funds rate from near zero to a range of 0.25% to 0.5%, signaling that rates might be on the rise in 2016.

Borrowers shouldn't expect rates to shoot skyward. The Fed is more likely to move slowly, at least in the near term.

In its Dec. 16 statement, the Federal Open Market Committee, which sets the federal funds rate, said it expects that "economic conditions will evolve in a manner that will warrant only gradual increases."

Still, that expectation isn't a guarantee. Indeed, the FOMC added, "the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."

Some analysts expect the FOMC to raise the federal funds rate as many as 4 times in 2016, says Robert Eisenbeis, chief monetary economist at Cumberland Advisors.

Eisenbeis thinks the Fed won't act that aggressively, given the timing of the FOMC's 2016 meetings relative to the release of fresh economic data that reflect the December increase.

"I can only see a maximum of 2 rate increases," Eisenbeis says. "That is more consistent with what 'gradual' is."

Previous
1 of 7
Next

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
MORTGAGE & REAL ESTATE NEWSLETTER

Timely market news and advice for consumers ready to buy, sell or invest in real estate. Delivered weekly.

Blog

Greg McBride

Greg McBride: Lay down ARMs?

Don't rule out adjustable-rate mortgages as interest rates rise.  ... Read more

advertisement
Partner Center
advertisement

Connect with us