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Fed keeps key rate near zero but moves up forecasts for initial rate hikes to 2023 amid upbeat outlook, stronger inflation
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Fed Meeting Update: June 2021
With the economy and inflation set to surge this year as the nation emerges from the COVID-19 recession, the Federal Reserve is starting to ease back from pandemic era policies aimed at jolting growth.

Citing an upgraded economic outlook and a spike in inflation, the Fed on Wednesday held its key interest rate near zero and vowed to maintain its bond-buying stimulus, but it's now forecasting two rate hikes in 2023, up from none previously.

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Mortgage Rates and Inflation
Mortgage rates and Inflation are closely related. When inflation rises and purchasing power falls, interest rates must also rise to keep investors interested. In the past, we have seen the 30-Year Mortgage Rate mimic the movement of the U.S. Inflation Rate.
Do mortgage rates increase with inflation?

History tells us that higher mortgage rates come during periods of high inflation and lower ones with low inflation. As of more recently, the pace of inflation in the United States jumped to 4.2 percent, according to the U.S. Bureau of Labor Statistics. The typical 30-year mortgage, on the other hand, costs a bit more than 3 percent. That marked the first time since August 1980 that American inflation was running hotter than mortgage rates.
Signs of Inflation

With a record number of vacancies, businesses report that they are raising pay and offering special bonuses for hiring, and several very large companies, including Amazon and McDonald’s, have increased wages amid a shortage of workers. Over time, inflation could be locked in by a “wage-price” loop, where workers anticipating higher costs ask for higher wages, and businesses factor those new expenses into their prices, creating a need for even higher wages to keep up.

Many economists believe this increased income will spur another Roaring ’20s. After being cooped up, consumers will want to party, spending down the entire savings pile. If this happens, demand could stay high for a long time, keeping up the pressure on supply and wages. Add in companies investing to try to catch up with demand and the conditions would be in place for a boom, with inflation continuing.
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Today's Market Rates
Fed Prime Rate                    3.25%
5-Year Swap Rate                0.97%
10-Year Swap Rate              1.53%
30-Year Swap Rate              1.88%
5-Year Treasury                    0.90%
7-Year Treasury                    1.27%
10-Year Treasury                  1.52%
30-Year Treasury                  2.11%
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CONTACT
PSRS Los Angeles
psrs-la@psrs.com
(310) 471-1911
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Founded in 1972, PSRS is one of the largest privately-held commercial mortgage banking firms in the western United States.
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