Federal Reserve
How The Federal Reserve Could Swing Mortgage Rates This Afternoon
April 29, 2009 by James K Barath, CMPS · Leave a Comment
The Federal Reserve adjourns from its two-day meeting this afternoon. It’s one of 8 scheduled meetings each year for the Federal Open Market Committee.
Like all FOMC get-togethers, the purpose of the meeting is to discuss financial and economic conditions in the U.S., and to make new policy to stimulate or retard economic growth, when necessary.
The Federal Reserve’s main tool for reaching this goal is the Fed Funds Rate.
When the Fed lowers the Fed Funds Rate, growth is stimulated. When the Fed raises it, growth is slowed. The Fed has other tools at its disposal, of course, but the Fed Funds Rate is the most common and most well-known.
Fed meetings are highly anticipated events to markets because the central bank’s can change the course of the U.S. economy with just a statement. As a result, traders tend to get jittery in advance of a Fed press release which often leads to erratic trading patterns.
With the economy continuing to teeter between growth and recession, the Fed has pledged to hold the Fed Funds Rate steady for as long as necessary. Therefore, it won’t be what the Fed does that could move mortgage rates this afternoon; it’ll be what the Fed says.
Post-meeting, the Federal Reserve will publish a press release summarizing the current economic conditions and the biggest longer-term risks that exist. If growth and inflation are identified as threats for late-2009 and 2010, mortgage rates will rise. This is because inflation is linked to higher mortgage rates.
The Fed’s press release hits the wires at 2:15 PM ET today. If you’re the cautious type, consider locking your mortgage rate prior to the release.
About the Author: James K Barath is a Certified Mortgage Planning Specialist, qualified liability advisor and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James Barath today for your Borrow Smart Analysis - the CALM Approach to Borrowing ! His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy! 