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The housing industry and market watchers in general are preparing for a big week as the\u00a0Federal Reserve (Fed)\u00a0<\/strong>is set to announce its next benchmark interest-rate move on Wednesday, Sept. 21, with most observers expecting at least a 75-basis point bump.<\/p>\n Prospects for a historic one percentage point increase, however, remain on the table, according to some market watchers.<\/p>\n \u201cAll eyes will be on the Fed this week with their next monetary policy move announced on Wednesday at 2 p.m. with [Fed Chair Jerome] Powell\u2019s news conference afterward,\u201d states financial advisory firm Mortgage Capital Trading<\/strong> (MCT) in its Daily Market Commentary e-newsletter. \u201cInvestors are expecting anything in the range of 75- to 100-basis point hike.\u201d<\/p>\n Investment bank Goldman Sachs<\/strong>\u2019 economic-research arm is betting the Fed\u2019s Federal Open Market Committee (FOMC) will boost the federal-funds benchmark by 75 basis points, to a target range of 3% to 3.25%. <\/p>\n \u201cThe bond market is pricing a one-in-four chance of a 100-basis point hike,\u201d Goldman Sachs reports in a FOMC preview delivered by email on Sunday, Sept. 18. \u201cA third ‘unusually large’ hike would be a reversal from the plan Chair Powell laid out in July to slow the pace of tightening, despite little surprise on net in the data.\u201d<\/p>\n Goldman Sachs cites several reasons to expect another large rate bump from the Fed this week, however. Among them are the following: \u201cThe equity market threatened to undo some of the tightening in financial conditions that the Fed had engineered, labor market strength reduced fears of overtightening at this stage, [and] Fed officials now appear to want somewhat quicker and more consistent progress toward reversing overheating [fast-rising inflation]\u2026.\u201d<\/p>\n Analysts with global financial-services company Nomura Holdings<\/strong> see the FOMC opting for a one percentage point boost in the federal funds rate this week.<\/p>\n “Materializing upside inflation risks are likely to result in the Fed raising rates by 100 basis point [1 percentage point] at the September FOMC meeting, above our previous forecast of 75 basis points,” Nomura states<\/a> in an analyst note.<\/p>\n The annual U.S. inflation rate<\/a> was down for the second month in a row in August, to 8.3%, compared with 8.5% in July. Still, the August mark was above market expectations of 8.1%. Core inflation, which excludes energy and food prices, hit 6.3% in August, up from 5.9% recorded in each of the two prior months.<\/p>\n Diane Swonk, chief economist at tax and advisory services giant KPMG<\/strong>, told the Washington Post<\/a> <\/strong>that said that a 100 basis point boost to the federal funds rate should be on the table, but added that also comes with risks.<\/p>\n \u201cEven though here I am arguing for an even bigger increase, the real issue is rapid increases themselves are destabilizing,\u201d Swonk said.<\/p>\n The CME Group<\/strong>‘s FedWatch<\/a> tool, which tracks the probability of FOMC rate moves, as of today, September 19, put the probability of a 75-basis point rate hike at 84% \u2014 down from 91% a week earlier. Odds for the FOMC lifting the federal funds rate by a full percentage point on Wednesday of this week, to a target range of 3.25% to 3.5%, stood at 16% as of today, up from 0% a week earlier. <\/p>\n Likewise, FedWatch as of today puts the odds of the FOMC adopting a 50-basis point rate bump at its September meeting at 0%, down from 9% a week earlier.<\/p>\n The Fed\u2019s Federal Open Market Committee (FOMC) has raised the federal funds benchmark rate four times this year, including a 25 basis-point boost in March; a 50 basis-point jump in May; and a 75 basis-point increase in June and again in July \u2014 bringing the current benchmark rate to a target range of 2.25% to 2.5%.<\/a> The rate bump in March represented the first time since 2018 that the Fed has increased rates. <\/p>\n “[Mortgage] rates have been on an upward trend, with the average 30-year fixed rate topping 6%,” MCT’s daily report states. “With home prices also near multi-year highs, demand has been hampered for many via affordability, which is weighing in on application demand across the country. <\/p>\n “Mortgage rates are under upward pressure this morning as the Fed decision gets closer.”<\/p>\n Following this week\u2019s meeting, the FOMC will meet again in November and December this year.<\/p>\n \u201cWe expect 50-basis point hikes in November and December, taking the funds rate to 4% to 4.25% at yearend,\u201d Goldman Sachs\u2019s FOMC preview report states, adding that \u201cwe expect the FOMC to slow the pace of rate hikes because \u2026 concern about overtightening will eventually rise\u2026.\u201d<\/p>\n The post Fed watchers expect at least a 75 bps rate hike<\/a> appeared first on HousingWire<\/a>.<\/p>\n