Fed Bumps Rates to 3.5%

SAN DIMAS, Calif. – The Federal Reserve continued its consistent approach to raising rates with another 25 basis point bump. The Fed Funds rate now stands at 3.5%. WesCorp VP of Economic and Market Research Dwight Johnston described the Fed as “slow but relentless” with its rate increases. In its statement, the Fed kept in its “measured” approach term for future rate changes. What was different is the Fed indicated that aggregate demand is strengthening. “They’re watching the retail sales numbers like the rest of us and watching how consumers are still spending,” said Johnston. Johnston said consumers are pulling money from their homes. Freddie Mac’s numbers yesterday showed that for the second quarter 74% of its refinancing loans saw consumers take cash out, to the tune of $59 billion. Johnston believes rates will wind up at 4.25% and then maybe taper off quicker than normal. He said longterm rates have remained steady through all this. Credit unions may get an opportunity to invest further out on the yield curve if those rates rise. Credit unions may have to go out past two years to take advantage, he said.