What To Expect For 2019 Interest Rates

Dated: 12/03/2018

Views: 32

ECONOMIC FORECASTS

The Outlook for Interest Rates in 2019

Kiplinger's latest forecast on interest rates

iStockphoto

By DAVID PAYNE, Staff Economist 
November 29, 2018

GDP Third-quarter growth a solid 3.5%, but slowdown is coming More »
JOBS Unemployment rate will decline further in '19 More »
INTEREST RATES 10-year T-notes at 3.6% by end ’19 More »
INFLATION 2.3% in ’19, the same as in ’18 More »
BUSINESS SPENDING Up 7% in ’18, boosted by expanded tax breaks More »
ENERGY Crude trading from $65 to $70 per barrel in March More »
HOUSING 5.46 million existing-home sales in '18, down 1.5% More »
RETAIL SALES Growing at least 4% in ’19 (excluding gas and autos) More »
TRADE DEFICIT Widening 7%-8% in ’18 More »

Market interest rates dipped a bit on Nov. 28 as Federal Reserve Chairman Jerome Powell made a dovish comment in a speech. Powell said that rates are “just below” the neutral level that the Fed wants. In an interview Oct. 3, Powell said rates were a “long way from neutral.” As a result, today’s comment provoked a major reaction in the financial markets.

It is likely that Powell is setting the stage for the end of once-a-quarter rate hikes sometime next year. The question is: Will the Fed raise rates four more times in 2019 as planned or stop earlier than that? We expect hikes for sure in December and March and likely in June, but the September 2019 hike looks to be off the table.

VIA E-MAIL:Kiplinger Alerts — Intelligence for your business success

Long-term interest rates have dropped a bit since October’s and November’s stock-market turbulence as some equity investors retreated to the bond market, as they usually do during stock market corrections. However, once the market is corrected, long rates should head up again. The Federal Reserve’s rate-hike program will push long rates up well into next year. Also, the low unemployment rate and tight labor market will keep pressing wages up. Though wage growth does not cause inflation in the near term, bond market participants will worry that fatter paychecks will prompt the Federal Reserve to prolong its rate-hiking program, and that worry will also boost long-term rates.

We think today’s 3.1% yield on the 10-year Treasury note will edge up to 3.2% by year-end and to 3.6% by the end of 2019. The bank prime rate that auto loans and home-equity loans are based on will bump up from 5.25% to 6% heading into 2020. The 30-year fixed-rate mortgage is likely to go up to 5.3%, and the 15-year fixed-rate mortgage should rise to 4.7%.

ADVERTISEMENT

Higher interest rates will come to more savers. Big banks have been slower than smaller banks, online banks and credit unions to reward savers. But their rates on money-market accounts and CDs are likely to head up.

Source: Federal Reserve Open Market Committee

SEE ALSO:America’s Yield Curve Panic Is Overdone

SHOW COMMENTS
Blog author image

Alicia Gantt

I have always had a passion and drive to help others. As a devoted wife and loving mother to two wonderful children, I know how busy life can get. To have the opportunity to become a Realtor has been ....

Latest Blog Posts

Local Holiday Plays

With the holidays quickly approaching take in a show, sit back, relax and forget about the to-do list! There are four great shows to see December 7 – December 16, 2018. Specific dates, times

Read More

Dec 10 2018 5881 1

205 Golden Willow-Easley Listing price $589,900 with 4 Bedrooms & 4 1/2 Baths Where luxury and location merge perfectly best describes this property being just 11 miles from downtown.

Read More

Lake House With Man Cave Or Mother In Law Suite On Lake Hartwell

424 Graham Road, Anderson 29625Listing price $357,000 with 3 Bedrooms, 3 1/2 Baths. Down stairs has a full bath with a small kitchen area this is a great space for a Man Cave or mother-in-law suite.

Read More

New Construction In Williamston 3 Bed 2 Bath Open Floor Plan And Granite Countertops

29697 - New construction in Williamston (currently a vacant lot), this will offer approx. 1335 sqft of living space offering 3br/2ba with an open floor plant and split bedroom plan. This home will

Read More