Federal Reserve, FOMC, Market Insight

Can The US Economy Be Kept Afloat by Today’s Fed Actions

August 10, 2010 by · 1 Comment 

In case you missed it, the Federal Open Market Committee (FOMC) met today to discuss monetary policy. Today’s meeting was the 5th of eight scheduled meetings and sixth overall for 2010.

Financial analysts and economic forecastors worldwide have attempted to estimate what the Federal Reserve will or will not change in their policy statement prior to the meeting. Often times it comes down to a single word that has been inserted or left out of the policy statement.

Why all the scrutiny of words? What’s the purpose of these meetings and why should home buyers and homeowners in Northwest Indiana care about the FOMC meetings?

First of all, the FOMC meetings provides a bird’s eye view of what the Federal Reserve believes to be important factors impacting the overall economy.

Second and more importantly, the press release from the FOMC meetings provides guidance to the financial markets on how the Federal Reserve Banks intend to control the supply and demand of money. It is this monetary policy that can and will dictate future economic growth.

According to FOMC Statement Press Release from today, the FOMC has a unique spin on the economy.

Positive economic factors:

  • Household spending is increasing gradually
  • Business spending…is rising
  • Underlying inflation has trended lower

Negative economic factors:

  • Household spending…constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
  • Business spending…weak investments and reluctant to add to payrolls
  • Bank lending continues to contract

Based on the Federal Reserves interpretation of the economy, they voted 9-1 to do the following:

  1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
  2. support price stability by reinvesting in longer-term Treasury securities (new clause)

What does all this mean?

The Fed is 100% committed to keep interest rates low until they are confident that the economy is en route to a full recovery. Thankfully, home buyers and homeowners in Northwest Indiana still have time to take advantage of historic low mortgage interest rates.

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James K Barath, CMPS®

James K Barath is a Certified Mortgage Planning Specialist®, Certified FICO® Professional, Certified Military Housing Specialist® 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 for your FREE Home Loan Approval !  His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy!

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Comments

One Response to “Can The US Economy Be Kept Afloat by Today’s Fed Actions”
  1. Yeah, the Titanic is an appropriate metaphor.
    The Fed plays sideways moves to appear to be doing something, while so many other indicators are turning South. Reminds me of the expression “whistlin’ past the graveyard”. Hoping by keeping eyes straight ahead they can ignore all the bad stuff, maybe they wont need to notice the evil spirits, ie the news of things (many sectors of the job market and economy) going from bad to worse.

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