The Federal Reserve rate remains unchanged as announced in the middle of last week. When the U.S. central bank started working in increasing the rates in December for the first time in over 10 years, it projected four hikes in 2016, with the first one expected to be announced in March. The central bank now only sees two hikes this year, which Fannie Mae says might come in June and December.
As reported by Yahoo! Finance, the central bank decided to retain the rate at 0.25 to 0.5 percent, citing the current global market volatility and the U.S. economic growth. In a statement, the central bank said "global economic and financial developments continue to pose risks."
But despite the undesirable global economic situations, the Fed emphasized that the U.S. economy is growing at a moderate pace, citing the better-than-expected gains in the labor market and the housing sector.
While majority of the traders expect at least one rate increase by the end of the year, Fannie Mae is still projecting Fed rate to rise twice this 2016, per HousingWire. In Fannie Mae's March 2016 Economic and Housing Outlook, economists are forecasting the rate increases by mid- and year-end despite their projections of a "flat" economic growth.
The report said that economic growth in the country is likely to remain at 2 percent this year despite signs of improvements in the financial markets. "Weakness in net exports and oil-related nonresidential investment, as well as the ongoing inventory correction process after unsustainable accumulations during the first half of 2015, should combine to drag on growth," Fannie Mae's report explained.
Fannie Mae Chief Economist Doug Duncan noted that stocks are starting to bounce back and oil prices are beginning to climb. Combined with the strong labor market, these factors outweigh the adverse effects of headwinds in the world market.
