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Fed chair Yellen tells Canadian homeowners to watch out: Don Pittis

June 18, 2015

Fed chair Yellen tells Canadian homeowners to watch out: Don Pittis

Your mortgage rates are going up, and U.S. Fed chair is pretty specific on how much

The financial analysts think they have it figured out. After listening to U.S. Federal Reserve chair Janet Yellen’s speech and her wily answers to questions from reporters, the consensus seems to be that a rate rise is coming later this year — the first one probably in September.

While that date is of crucial interest to market wheeler-dealers, for Canadian mortgage-holders Yellen had a far more important message. It is especially important in a week when Manulife warned that for many home owners, a rate hike could be trouble.

While a large majority of Yellen’s advisory committee agrees that the economy will require a rate rise before the end of the year, Yellen herself said the exact moment of such a rise really doesn’t matter.

“The importance of the timing of the first decision to raise rates is something that should not be overblown, whether it is September or December or March,” said Yellen in response to a question. “What matters is the entire path of rates.”

Best guesses

Of course neither Yellen nor the rest of the Federal Open Markets Committee members actually know for sure where the economy is headed. All they can do is make their best guesses, based on examining all the latest economic indicators, then sort of sum up to come to a collective conclusion.

As Yellen said yesterday, the committee’s best guess is that the U.S. economy has begun expanding moderately after a sickly first three months of the year. Jobless figures show that the supply of surplus labour is gradually being used up.

Consumer spending is still pretty soft, they conclude, but the housing market has perked up. On the downside, business investment in plant and equipment remains soft. So do exports.

 

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