The strong job’s report of May prompted economists to believe that Janet Yellen, the Chair of the Federal Reserve might follow through and increase interest rates this fall, the first time in almost a decade. Experts attribute the healthy job’s report, in part, to students temporarily entering the labor force during the summer break and new graduates entering the labor force for the first time in their respective professions.
The numbers were higher than expected, 280,000; the average in a solid economy should be about 200,000. According to experts, these numbers would help bring the unemployment rate down in a more consistent way. Next week’s meeting of the Federal Reserve will bring a better outlook in the subject of interest rates, Yellen has hinted that she’s ready for an increase in September and experts suggest a second increase could also happen before the end of the year.
Higher wages and more jobs are two of the main factors for the Fed to consider a rate increase. Some economists and investors fear the decision could backfire, but agree that something must be done.
The President of the Federal Reserve Bank of New York, William Dudley told an audience in Minnesota that “Inaction could force the Fed into a stop-start monetary policy”, he added, “Very low interest rates can also cause distortions in financial markets that threaten stability, though instability is not apparent now”.
Other experts agree and also say that inaction from the Fed could push the U.S back into another recession. Dudley was very careful when addressing the subject of the job market, saying that he’s uncertain about whether the job market will continue to grow at the impressive rate shown during the first five months of 2015.
Economist’s eyes will be focused on the June 16 – 17th meeting of the Fed, when they hope to have more answers about what direction the US economy is taking and if the Fed will take action and move forward with an increase of the interest rates.
Interest rates changes will affect the real estate market so buyers and sellers will have to think twice before committing to the next real estate transaction.
Interest rates changes may not change the qualifications, but will give us a great opportunity to save a substantial amount of money when buying real estate. It will still be difficult to qualify for home loans. Homeowners, stay tuned and let’s hope for the best.