If you want to know where the economy is headed, don't watch the Fed. Track this interest rate instead. Anything above 4% is bad.
raises interest rates, that's not actually the thing that causes borrowing costs to rise for most people.is the one to watch closely. That controls the cost of money for many consumers and other important things that flow from that long-term rate.Sometimes when the Fed raises rates, investors think it has the economy under control andOther times when the Fed raises, investors worry it's behind the curve:may grow too much and prices will rise in future years.
If you're a mortgage lender, you loan money to someone for 30 years and charge them, say, 5% annually. Then, you often turn around and sell a bunch of these mortgages as an asset to investors. If the 10-year Treasury bond pays 4%, then investors won't want your 5% mortgage bond. They will demand a higher return for the extra risk because they can just buy that 10-year Treasury bond instead, which is safer.
Thirty-year fixed mortgage rates are averaging about 7.3% right now, according to Bankrate. If the 10-year Treasury-bond yield stays at about 4.1%, the cost of these mortgages could rise in coming days and set 20-year highs. Stock-market investors value companies based on future earnings, not current profit. This is especially true for technology companies that are growing quickly but may not make much money for years.
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