The Federal Open Market Committee (FOMC) Meets in March
The FFed Meets in March – this month! The Federal Open Market Committee (FOMC) of the Federal Reserve System will meet later this month on March 19, 2019 and March 20, 2019. The FOMC will provide a “Summary of Economic Projections” report at this meeting and projections in the report may be the deciding factor on whether or not to raise the Federal Funds Target Rate (FFTR), which will in turn, trigger a rise in interest rate offerings by financial institutions. The report considers projections for GDP growth, the unemployment rate, inflation, and the appropriate policy interest rate.
On January 30, 2019, the Federal Open Market Committee met for the first monetary policy meeting of 2019. The committee, at that time, voted to leave the Federal Funds Target Rate (“FFTR”), the rate that banks charge each other for overnight lending, at 2.25% – 2.50%. The Federal Funds Target Rate is a benchmark rate and is used to calculate the United States (Fed) Prime Rate. The United States (Fed) Prime rate is calculated by adding the FFTR + 3%. As of January 30, 2019, the United States Prime Rate is 5.50%.
The FOMC has indicated plans to raise the rate to 3.6% by 2020 and 3.8% by 2021. This means that by 2020, the United States Prime Rate could be 6.5%, or possibly higher, and lenders will increase mortgage interest rates lock-in-step with the increases by the FOMC.