Federal Reserve, FOMC, Market Insight

Can You Hear What The Fed Said That Will Impact Housing

September 21, 2010 by · Leave a Comment 

Get Smart - Can You Hear Me by jkbarath | Flickr.comWhen E.F. Hutton talks, people listen.” This was true in the 1980’s.

Today however it’s all about what the Federal Reserve had to say from the Federal Open Market Committee (FOMC) meeting, the 6th of eight scheduled meetings and seventh overall for 2010.

Financial analysts and economic forecasters worldwide attempt to guesstimate what the Federal Reserve will or will not say in their policy statement prior to the meeting. Often times it comes down to a single word that has been modified in the policy statement.

What’s the purpose of these meetings? Why all the scrutiny of words?

Why should home buyers and homeowners in Northwest Indiana even 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 had this to say about the economy.

Positive economic factors:

  • Household spending is increasing gradually
  • Business spending…is rising
  • Bank lending has continued to contract, but at a reduced rate in recent months
  • 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…less rapidly than earlier, while investment…continues to be weak
  • Employers remain reluctant to add to payrolls
  • Housing starts are at a depressed levels

Based on the Federal Reserves interpretation of the economy, they voted 8-1 to do the following:

  1. maintain the target range for the federal funds rate at 0 – 0.250% for an extended period
  2. maintain its existing policy of reinvesting principal payments from its securities holdings

The Federal Reserve is cautiously concerned about unemployment and falling prices. Accordingly, the Federal Reserve is ready to provide additional support to inject new life into today’s questionable economic recovery.

What does all this really mean to home buyers and homeowners in Northwest Indiana?

The Federal Reserve is still committed to keep interest rates low until they are confident that the economy is reaching their ideal, economic target growth rate. 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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