Fed Rate Hike Unlikely To Move Mass. Market


The Fed’s decision yesterday to inch the federal funds rate upward signaled its cautious confidence in the U.S. economy, but it ruffled few feathers in the Massachusetts real estate market.

In remarks to reporters following the Fed’s announcement that it would raise the federal funds rate to between 0.75 percent and 1 percent, Chairwoman Janet L. Yellen said the decision “does not represent a reassessment of the economic outlook” and signaled that the Fed would most likely pursue gradual increases to the federal funds rate.

“Today’s decision also reflects our view that waiting too long to scale back some accommodation could potentially require us to raise rates rapidly somewhere down the road, which in turn could risk disrupting financial markets and pushing the economy into recession,” she said.

The stock market reacted to the Fed’s announcement with enthusiasm, though bankers were a bit more tempered in their reactions.

“The recovery seems to have gained some tailwind and we’re seeing growth start to accelerate globally and inflation pressures in the U.S. economy and abroad, so it is not surprising that the Fed followed through on their broadly signaled rate increase at this month’s meeting,” Tony Bedikian, head of global markets at Citizens Bank, said in a statement. “What remains to be seen is whether we see consistent economic progress this year and how many additional rate increases will result.”

Several banks, including Citizens, Citibank, BB&T and M&T Bank, raised their prime lending rates from 3.75 percent to 4 percent.

The Massachusetts real estate market is unlikely to feel much impact from the rate increase. It is, after all, just 25 basis points and in the grand scheme of things, rates are still around historic lows. And local lenders, many of whom have seen the longest refinance boom of their careers, have been shifting their focus to the purchase market for some time. Rates weren’t going to stay this low forever.

Chip Poli, founder and president of Poli Mortgage in Canton, wasn’t especially surprised by the Fed’s decision. Where his own business is concerned, Poli said he’s seen some potential buyers moving a little bit faster in anticipation of future rate hikes, and he even had a few customers trying to lock in rates ahead of Wednesday’s announcement. This week’s rate increase means that some buyers will have a little bit less purchasing power than they might have a year ago, but he doesn’t see this latest increase shaking many buyers out of the market.

“I think we’re in good shape right now. I don’t know what the next two will do, but I do believe Boston and Massachusetts in general are really strong markets,” he said. “People just need to digest that and be educated about it.”



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Fed Rate Hike Unlikely To Move Mass. Market

by Laura Alix time to read: 2 min
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