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Economic Analyst Talks 'Dovish' Fed Policy Shift

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Economic Analyst Talks 'Dovish' Fed Policy Shift


March 28, 2019
The Federal Reserve's dovish policy change making further interest rate increases unlikely for the rest of 2019 sent current rates down, and experts say is a signal of the Fed's view of a "slowing global economy."
Photo: Jacques Le Henaff / Unsplash

The Federal Reserve's dovish policy change making further interest rate increases unlikely for the rest of 2019 sent current rates down, and experts say this may be a signal of the Fed's view of a "slowing global economy."

Zillow economic data analyst Matthew Speakman says that before the announcement, markets had "largely assumed" there would be rate hikes, if not in the near future. Yet, the "revelation" prompted a sharp drop in rates, and a rise in mortgage application volume followed. There is an expectation that rates will continue to drop.

After a quiet start to a week that was light on market-moving economic data and geopolitical developments, bond yields – a proxy and leading indicator for mortgage ratesmoved sharply downward following the Fed signals that additional hikes to its benchmark rate were unlikely to occur this year. More importantly for bond markets, the Fed said it will stop the reduction of its balance sheet in the fall and slow the rate of reduction until then. The latter will inject more demand into the bond market, which will push yields, and mortgage rates, downward as a result.

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