FOMC

Fed Holds Steady on Federal Funds Rate

April 29, 2016 by · Leave a Comment 

Fed Holds Steady on Federal Funds Rate

In its post-meeting statement, the Federal Open Market Committee (FOMC) of the Federal Reserve announced its decision not to raise the current federal funds rate of 0.25 to 0.50 percent. Although FOMC members acknowledged further improvement in the U.S. economy and jobs markets, the committee cited the following as influencing its decision not to raise the current federal funds rate:

  • Household income continued to rise, but consumers have “moderated” their spending.
  • Inflation is expected to remain below the Fed’s goal of two percent in the near term.
  • Temporary influences including low energy and import prices are expected to ease.

FOMC monetary policy decisions made in April’s meeting were guided by the Fed’s dual mandate of achieving maximum employment and its inflation goal of two percent. Labor markets improved since the Committee’s March meeting, but inflation is not expected to reach the Fed’s goal in the near term.

No Fed Rate Increase in April; Moderate Increases Expected

While the FOMC did not raise the federal funds rate, its statement suggested that future rate increases are likely. Potential increases in the federal funds rate would be gradual into the medium term. FOMC’s April statement hinted that incremental rate increases over time would be expected to facilitate further economic growth and help achieve the two percent inflation goal. According to the statement, any potential increases in the federal funds rate would be “accommodative.” This indicates that FOMC members do not want to raise rates too quickly, which could interfere with current economic growth.

Fed Concerns over Global Economy Ease

Notably absent from April’s FOMC statement were concerns over global economic conditions and developments. In March, the Fed characterized global economic and financial conditions as a risk to U.S. economic growth, but April’s statement said that FOMC members would continue monitoring global news and developments with no mention of potential risks.

Analysts said that the Fed could have been “more hawkish” in its position, but also said that a rate increase could occur in June if FOMC members conclude that economic conditions are favorable. FOMC statements typically indicate that monetary policy decisions are pre-determined way, but rely on the committee’s ongoing review of global and domestic financial and economic developments.

Unless economic developments intervene, Fed policy makers opened the door to a rate increase in June. Past FOMC statements indicated plans to raise the federal funds rate up to four times in 2016, but these plans were revised to two potential rate increases for 2016.

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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Policymakers Make Interesting Decision on Interest Rates

March 17, 2016 by · Leave a Comment 

Fed Policymakers Make Interesting Decision on Interest RatesAccording to a press release by the Federal Reserve, the Federal Open Market Committee (FOMC), the current target federal funds rate will hold steady at  0.25 to 0.50 percent. Committee members cited positive developments in the U.S economy including jobs growth, stronger labor markets and gradually increasing inflation. In addition, stronger housing sector and household spending were also noted as positive signs for the economy. Committee members cited risks associated with global economic and financial developments as a concern.

FOMC members are guided in decision making by the Federal Reserve’s dual mandate of maximum employment and price stability. Inflation remains below the committee’s longer-term goal of 2.00 percent; FOMC members attributed slow inflation growth to lower energy prices. The Fed described its current monetary policy stance as “accommodative” and expects it to remain so until inflation reaches 2.00 percent.

Analysts said that the Fed has scaled back its forecast for rate increases from four increases to two increases in 2016, but any actions will depend on FOMC review of current and expected domestic and global factors. Fed Chair Janet Yellen previously cited turbulent market conditions as “significantly” tightening financial conditions due to lower stock prices.

Fed Chair  Janet Yellens Press Conference

Fed Chair Janet Yellen explained policy makers’ decision not to raise the target federal funds rate in a press conference after the FOMC statement. Chair Yellen responded to media representatives’ questions about FOMC’s views on inflation and unemployment, zero or negative interest rates and uncertainty about China’s economy

Ms. Yellen cautioned against over-emphasis of the relationship between unemployment and inflation as employment rates only modestly impacts tracking inflation indicators as they relate to wages and prices. In her remarks about the decision not to raise the target federal funds rate, Chair Yellen cited uncertainty about China’s economy as a factor in the decision not to raise the benchmark federal funds rate.

The U.S. economy is strengthening as Europe and Japanese economies wane. Chair Yellen indicated that although global economic decisions influence U.S. monetary policy, that U.S. decisions are not based solely on global economic and financial developments.

In response to a question about whether the FOMC has considered the effects of zero to negative interest rates used by Japan and other nations, Chair Yellen said that committee members were not actively considering or discussing negative interest rates in view of improving economic conditions. Ms. Yellen said that Japan incorporated negative interest rates but did not realize the desired effect of increasing inflation.

Media analysts said that a rate increase in April’s FOMC meeting seems unlikely, but with world-wide economic conditions changing quickly, such, forecasts can’t be cast in cement.

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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Federal Reserve Raises Short-Term Interest Rates

December 17, 2015 by · Leave a Comment 

Federal Reserve Raises Short Term Interest RatesAfter prolonged speculation by economic analysts and news media, the Federal Open Market Committee of the Federal Reserve raised short-term interest rates for the first time in seven years. Committee members voted to raise the target federal funds rate to a range of 0.25 to 0.50 percent from a range of 0.00 to 0.25 percent to be effective December 17. The good news about the Fed’s decision is that the Central Bank had enough confidence in improving economic conditions to warrant its decision. But how will the Fed’s decision affect mortgage rates?

December’s FOMC statement cited improving job markets, increased consumer spending and declining unemployment as conditions supporting the Committee’s decision to raise the target federal funds rate. While inflation has not yet reached the Fed’s goal of two percent, FOMC members were confident that the economy would continue to expand at a moderate pace in spite of future rate increases. The FOMC said that the Central Bank’s monetary policy remained “accommodative.”

Little Impact Expected on Mortgage Rates after Fed Decision

The Fed’s decision to raise short-term rates likely won’t affect mortgage rates in a big way. The Washington Post quoted Doug Douglas, chief economist at Fannie Mae: “This one change, will in the larger scheme of things, will be unlikely to make a dramatic impact on what consumers will feel.”

Mortgage rates, which are connected to 10-year Treasury bonds, may not rise and could potentially fall. While the interest rate increase could increase yields on these bonds, analysts say that multiple factors impact 10-year Treasury bonds, so a rate increase is not set in stone for mortgage rates.

Rising Mortgage Rates Would Impact Affordability and Cost of Buying Homes

Higher mortgage rates could sideline some first-time and moderate income home buyers and would also increase the long-term cost of buying a home. Interest rates on vehicle loans and credit cards are more closely tied to the Fed rate and may rise according to current and future Fed rate hikes. Rising consumer interest rates indirectly impact housing markets as prospective home buyers face higher debt-to-income ratios caused by higher interest rates on car loans and credit card balances.

During a press conference following the Fed’s announcement, Fed Chair Janet Yellen emphasized that future rate increases would be “gradual.” Chair Yellen said that the Fed’s decision reflects the agency’s confidence in an economy that is on a path of “sustainable improvement.” When questioned about inflation rates, Chair Yellen said that the Fed will closely monitor both expected and actual changes in the inflation rate.

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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NAHB: Builder Confidence Hits Highest Rate in 9 Years

September 18, 2015 by · Leave a Comment 

Whats AheNAHB Builder Confidence Hits Highest Rate in 9 Years Fed Doesnt Raise Ratesad For Mortgage Rates This Week September 8 2015The National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index reported that home builder confidence rose by one point to a reading of 62 for September. This was the highest reading since November 2005, when the NAHB reported a reading of 68 for home builder confidence. Any reading above 50 indicates that more builders are confident about housing market conditions than those who are not.

NAHB notes that builder confidence has been growing at a moderate pace since July 2014; this is in line with economic conditions in general. Relatively low mortgage rates and stronger labor markets are helping would-be buyers with their decisions to buy homes now.

FOMC Statement and Fed Chair Press Conference: No Rate Hikes Yet

The minutes of the Federal Open Market Committee of the Federal Reserve revealed that Fed policymakers have decided to wait on raising the target federal funds rate, which is currently set at 0.00 to 0.25 percent. While the FOMC statement indicated that policy makers acknowledge moderate progress in economic growth, a majority did not feel that the economy is ready to withstand a rate hike. When the Fed does raise rates, consumers can expect to see higher mortgage rates as well as increases in lending rates for credit cards and loans.

FOMC members said that housing markets were growing at a steady but moderate pace, but that inflation was lagging below the Fed’s benchmark 2.00 percent level due to transitory effects of lower energy and import prices. The Fed expects that inflation will reach its 2.00 percent goal over the medium term and will not likely raise rates until FOMC members are confident that inflation will rise as expected.

FOMC members continued to assert that any decision to raise rates will be based on close review of domestic and global financial and economic trends and will not be based on meeting the Fed’s dual mandate of achieving maximum employment and an inflation rate of 2.00 percent.

Committee members also said that economic conditions could continue to warrant keeping the target federal funds rate below normal levels for the longer term.

Fed Chair Janet Yellen gave a press conference after the FOMC statement concluded. She addressed questions about the Fed’s decision not to raise rates and said that concerns over global developments contributed to Fed policy makers’ decision not to raise rates. Ms. Yellen explained that a stronger U.S. dollar has caused deflationary pressures and increased competition for U.S. exports. The Fed isn’t overly concerned about global conditions at present, but changing circumstances could change the Fed’s likely intention to raise rates before year end.

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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Federal Reserve FOMC Announcement

July 30, 2015 by · Leave a Comment 

Federal Reserve FOMC AnnouncementThe stage was set in high suspense for FOMC’s post-meeting announcement on Wednesday. As fall approaches, analysts and the media are looking for any sign of when and how much the Fed will raise its target federal funds rate. According to CNBC, some analysts were projecting two interest rate hikes before year end, but the truth of the matter remains unknown until the Federal Open Market Committee announces its intentions.

Meanwhile, reports of what Fed rate hikes will mean for consumers were released prior to the FOMC statement. Real estate analyst Mark Hanson said that a rate hike would “crush” housing markets, which continue to improve slowly in spite of the current 0.00 to 0.25 percent federal funds rate.

Last Friday’s report on June sales of new homes shows unpredictable progress in housing. Analysts estimated that new home sales would reach 550,000 units based on May’s reading of 517,000 new homes sold. June’s reading came in at 482,000 units sold.

FOMC Statement: Current Federal Funds Rate “Remains Appropriate”

The Federal Open Market Committee of the Federal Reserved announced as part of its post-meeting statement that it would not immediately increase the federal funds rate. The FOMC statement cited concerns over the inflation rate, which remains below the Fed’s goal of 2.00 percent. According to the statement, the FOMC will not move to raise the federal funds rate until the committee is “reasonably confident” that inflation will achieve the committee’s goal of 2.00 percent over the medium term.

No prospective dates for raising the target federal funds rate were given. The FOMC statement repeated language included in previous statements indicating that committee members anticipate that economic events could further postpone increases in the federal funds rate. The FOMC statement asserted that committee members continue to monitor domestic and global financial and economic developments as part of the decision-making process for raising the target federal funds rate.

FOMC members agreed that policy accommodation may be required “for some time” after the committee’s dual mandate of maximum employment and 2.00 percent inflation have been achieved. This suggests that FOMC members are not in a hurry to boost rates when economic uncertainty remains.

In terms of housing markets, the Fed’s decision not to raise rates likely caused a sigh of relief as rate increase would have caused consumer interest rates including mortgage rates to rise.

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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Federal Reserve: No Change on Target Fed Funds Rate

June 18, 2015 by · Leave a Comment 

Federal Reserve: No Change on Target Fed Funds RateThe Federal Open Market Committee (FOMC) of the Federal Reserve did not move to increase the Fed’s target federal funds rate, which is currently 0.00 to 0.250 percent. Although the committee acknowledged further progress toward achieving the Federal Reserve’s dual goal of maximum employment and an inflation rate of two percent, committee members indicated that they want to see further improvements in both areas before raising the federal funds rate.

In its customary post meeting statement, the FOMC said that it may not raise rates when both goals have been achieved. This statement may have been meant to calm ongoing speculation that the Fed will soon raise rates. The statement also said that FOMC members may “elect to keep the target federal funds rate below levels the committee considers normal in the longer term.” This stance suggests that the Fed wants to be very sure that economic improvement is on a solid track before it raises rates.

The statement further indicated that the FOMC is not completely influenced by the Fed’s goals of maximum employment and two percent inflation; instead, the committee said that it will consider ongoing domestic and global news and economic reports along with readings on financial and economic developments as part of its decision to raise or not raise the target federal funds rate.

Analyst reactions to the decision not to raise rates suggests that the Fed is likely to raise rates at its September meeting and possibly again in December.

Fed Chair Janet Yellen’s Press Conference

Fed Chair Janet Yellen gave a scheduled press conference after the FOMC statement was issued and answered questions on a variety of topics. Ms. Yellen noted that retiring baby boomers are expected to take up slack in employment lags; as boomers retire, they drop out of the work force and reduce the number of people actively seeking employment.

Ms. Yellen also noted that when the Fed does raise rates, seniors and retirees could benefit from higher yields on savings.

In response to questions about when the Fed will raise its target federal funds rate, the Fed Chair said that the Fed has not decided when to raise rates and said that unfolding economic developments would play a role when the Fed does decide to raise rates.

Ms. Yellen encouraged emphasis on when the Fed will make its first rate hike. She recommended focusing on “the entire trajectory” of rate increases, which some analysts took to mean don’t panic about the first rate increase.

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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FOMC Minutes: Housing Market Stable But Slow

April 9, 2015 by · Leave a Comment 

FOMC Minutes: Housing Market Stable But SlowThe minutes of the March meeting of the Fed’s Federal Open Market Committee (FOMC) were released Tuesday and included a staff review of current economic conditions. The minutes noted that while labor markets continued to grow, inflation to the Fed’s target rate of 2.00 percent was impeded by dropping fuel prices. The Committee noted that expectations for longer-term inflation remained stable.

Non-farm payrolls, which include both private and public sector jobs, grew in January and February and the national unemployment rate reached a new low of 5.50 percent in February. Readings for workers employed part time due to economic reasons edged down and workforce participation was up.

These developments are noteworthy as in recent months analysts have repeatedly cited concerns over the numbers of workers who have stopped looking for work and those who work part time because they cannot find full-time employment. Meeting participants said that underutilization of labor resources “continued to diminish,” but also said that levels for those involuntarily working part-time and still elevated numbers of workers no longer seeking employment.

Personal consumption expenditures slowed in the first quarter due to falling fuel prices and winter weather conditions. Households had more disposable income and household wealth increased due to increasing home values. The Committee said that consumer sentiment was near pre-recession levels according to the University of Michigan’s consumer sentiment survey.

Fed Says Housing Activity “Slow,” No Decision on Raising Fed Funds Rate

The FOMC minutes reflect the committee’s view that housing markets are performing at a slower rate than other economic sectors. The minutes said that building permits and housing starts for single family homes were lower in January and February. Sales of new and existing homes were down in January, but pending home sales rose. This suggests that while markets slowed (as they typically do) during winter, pending sales suggest that completed sales will recover in the late winter and early spring.

The FOMC minutes noted that mortgage credit remained challenging for those in the lower portion of the credit score distribution, but said that the cost of mortgages was historically low for those who qualified for home loans.

The Committee also addressed the likelihood of raising the Federal Funds rate in its usual non-definitive manner. While raising the rate at the next meeting seemed unlikely, committee members wanted the flexibility to raise the target federal funds rate when conditions warrant. The target rate is currently set at 0.00 to 0.25 percent; when the FOMC moves to raise the target federal funds rate, the cost of credit including mortgage loans can be expected to increase.

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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Fed Not in a Hurry to Raise Rates: FOMC Meeting Minutes

February 19, 2015 by · Leave a Comment 

Fed Not in a Hurry to Raise Rates FOMC Meeting Minutes

Minutes of the Federal Open Market Committee (FOMC) meeting held January 27 and 28 were released on Wednesday. According to the minute’s transcript, it appears that Fed policymakers are in no hurry to raise the target federal funds rate. Members said that raising rates too soon could swamp the strengthening economy and expressed concerns that changing the committee’s current “patient” stance on rising rates could cause more harm than good to current economic conditions.

FOMC members discussed the Fed’s use of the word “patient” in its guidance, and said that dropping the word could incorrectly suggest that the Fed is planning to act sooner than later on raising the Fed’s target interest rates, and could result in “undesirably tight” financial conditions. While a majority of members agreed on protecting current economic conditions by raising rates too soon, member viewpoints varied on which conditions would support the first rate hike.

Target Inflation Rate of Two Percent “Most Consistent” with Fed’s Statutory Mandate

According to the Federal Reserve’s statutory mandate supplied by Congress, the Fed seeks to provide maximum employment, price stability and moderate long-term interest rates. The Fed established a target inflation rate of 2.00percent as a benchmark for economic health, but inflation has remained consistently below the target rate according to the annualized index reading for personal consumption expenditures.

FOMC members did not set a target rate for annual unemployment; FOMC members cited unpredictable “non-monetary factors that affect the structure and dynamics of the labor market” as reasons why it’s impossible establish an accurate target percentage rate for national unemployment. The minutes caution that these factors are sufficiently unpredictable that they may cause the Fed to revise or reverse its policies concerning national unemployment readings.

Committee members noted that short-term fluctuations in the federal funds rate could be expected. The minutes indicated that in general, day-to-day fluctuations outside of the Fed’s target range were not surprising as historical data indicated that such changes had “few if any implications for overall financial conditions or the aggregate economy.”

FOMC members agreed that the economy had expanded at a solid pace, but noted that inflation had fallen due to rapid decreases in fuel prices.

Fed/FOMC Chair Janet Yellen did not hold a post-meeting press conference at the conclusion of January’s FOMC meeting; she is scheduled to hold a press conference at the conclusion of the next FOMC meeting on March 18, 2015.

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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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