Federal Reserve, FOMC, Market Insight

What’s Humpty Hump Have To Do With the Federal Reserve

November 3, 2010 by · 2 Comments 

The Humpty Dance by Digital UndergroundStop whatcha doin’, ’cause I’m about to ruin, the image and the style that ya used to. I look funny, but yo I’m makin’ money see, so yo world I hope you’re ready for me.

These famous lyrics which were sung by Humpty Hump in his infamous 1989 hip hop song “The Humpty Dance” seems so appropriate for what the Federal Reserve had to say from the Federal Open Market Committee (FOMC) meeting, the 7th of eight scheduled meetings and eighth 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 will accomplish their dual mandate to foster maximum employment and price stability.

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 on equipment and software is rising
  • Longer-term inflation expectations have remained stable
  • Underlying inflation has trended lower in recent quarters

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 10-1 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
  3. expand it holdings of securities by $600 billion by 2nd quarter 2011 ($75 billion per month)

Ready or not, laugh if you want to, the Federal Reserve is taking bold steps to combat slow employment and economic growth. Only time will tell if the markets were ready for this new round of quantitative easing.

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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2 Responses to “What’s Humpty Hump Have To Do With the Federal Reserve”
  1. Christina Fieldhouse says:

    The bottom line of this story is very promising for everyone looking to purchase a home. Record low interest rates will still be available to take advantage of.

  2. Christina – Record low interest rates are all relative especially if clients cannot qualify. If you have clients who want to take advantage of these historic low mortgage rates, make sure that they have a plan to move forward. Better yet, have them contact me and I will help them create a plan.

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