Investors With an Eye on Geopolitics Send Mortgage Rates Lower Despite Fed Hike

Mortgage rates fell last week, erasing the previous week’s gains, after the Federal Reserve lifted the target federal funds rate by 25 basis points. The Fed’s move had been widely anticipated, but economic forecasts and comments from Board officials pointed to slightly more hawkish monetary policy stances.

Yet rates still fell, largely due to comments from European Central Bank officials and escalating trade tensions between the United States and China.  New tariff measures have sent investors toward safe assets and increased the odds of a U.S. economic downturn, which could prompt the Federal Reserve to lower interest rates.

Two years ago this month, the United Kingdom voted to leave the European Union in the first of what has become a recurring round of lower interest rates as investors flock to safe assets due to heightened geopolitical risk.

There are several speeches from key Federal Open Market Committee voters over the next week, but geopolitical risk is likely to dominate headlines and major market movements.