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U.S. NEWS Saturday 17 december 2016
US Financial Front:

Some advice for borrowers and investors: Take a deep breath

C. S. RUGABER, Yet it’s unclear if inves-
ALEX VEIGA tors’ expectations will pan
AP Economics Writers out. The markets appear
WASHINGTON (AP) — If to expect Trump to get
you’re about to buy a Congress to enact steep
home, shop for a car or tax cuts, a huge spend-
borrow for college, the pros ing package to upgrade
have some advice: roads, bridges and airports
Go ahead. and a softening of regula-
The Federal Reserve’s deci- tions in banking, energy
sion Wednesday to slightly and other sectors. Tim Hop-
raise its key interest rate, per, chief economist at
advisers say, should have TIAA Global Asset Manage-
little effect on mortgages ment, says that if Congress
or auto and student loans. appears sure to pass those
The Fed doesn’t directly af- proposals, the 10-year Trea-
fect those rates, at least not sury’s yield could rise a fur-
in the short run. ther half-point to 3 percent.
Nor should the economy’s That would likely happen,
health be much affected he says, even if the Fed de-
by the Fed’s move. lays further rate increases
That said, rates on some until mid-2017 or later.
other loans — notably But at least some of Trump’s
credit cards, home equity Real estate agent Lauren Newman, right, prepares to show Steve Martin a home for sale in Mount proposals could face resis-
loans and adjustable-rate Pleasant, S.C. If you’re about to buy a home, shop for a car or borrow for college, the pros have tance in Congress. They
some advice: Go ahead. The Fed’s move to slightly raise its key rate should have little effect on
mortgages — will likely rise mortgages or auto and student loans. might not pass — or at least
soon, though only mod- (AP Photo/Chuck Burton) not for months or even
estly. Those rates are based years.
on benchmarks like banks’ In response, the rate on the Bride, chief financial ana- yond the Fed, from inflation “Markets seem to be pric-
prime rate, which moves in 10-year U.S. Treasury note lyst at Bankrate.com. expectations to economic ing in this Goldilocks sce-
tandem with the Fed’s key has jumped about half a Next year, if the economy outlooks. And those trends nario where everything in
rate. Mortgage rates have percentage point. Long- picks up as many predict, can be shaped by events Washington comes togeth-
been surging, for reasons term mortgage rates tend the Fed might accelerate abroad as well as in the er for a tax cut and stimu-
that have little to do with to track the 10-year Trea- its rate hikes. That would United States. lus,” says Scott Anderson,
the Fed. Rather, Donald sury. The average rate on be cause for consumers to Since Trump’s election, in- chief economist at Bank
Trump’s election as presi- a 30-year fixed home loan consider paring short-term vestors have sent stock of the West. “That’s a little
dent — with his pledge to is up nearly in lockstep with debt, like adjustable-rate prices up and demanded Pollyanna-ish.”
slash taxes, loosen regula- the 10-year Treasury — to loans and credit cards. higher bond yields. Faster If Trump’s program stalls
tions and increase infra- about 4.1 percent from 3.5 Shorter-term consumer economic growth tends to and investors foresee less
structure spending — has percent. rates are most affected by benefit stocks. And higher inflation and growth, the
raised the prospect of fast- “The Fed isn’t what’s in- the Fed. inflation erodes the value 10-year yield — and mort-
er economic growth and fluencing mortgage rates But longer-term rates are of bonds; their yields then gage rates — could end up
inflation. right now,” said Greg Mc- influenced by factors be- rise until buyers return. declining. q