Fed Funds Rate

Fed Minutes Show an Improving U.S. Economy Threatened by the Eurozone

The Federal Reserve has released the minutes from its most recent Federal Open Market Committee meeting. The Fed Minutes are a detailed meeting recap; the companion piece to the more brief, more well-known press release.

As a comparison, the minutes of the last FOMC meeting contained 60 paragraphs and 7,027 words. The post-meeting press release was just 5 paragraphs and 382 words.

December’s Fed Minutes shows Fed members with a positive, cautious, take on the economy.

Recent data suggests that the U.S. economy is expanding, the Fed said, but “strains” in global financial markets pose “significant risks” to the downside. This tell us that the Fed believes its economy-stimulating programs are working, but that officials remained concerned by events in the Eurozone.

The U.S. economy could be impacted by fallout. 

Other meeting consensus included : 

• On growth: The economy is expanding, despite slowing in “global economic growth”
• On housing: Data suggests the “depressed” market “could be improving”
• On inflation: Prices are stable, and remain within tolerance levels

The Fed’s analysis was of little surprise to Wall Street, and going forward, Fed Chairman Ben Bernanke wants to keep it that way. The Fed Minutes contained a passage regarding market communication, and how the Fed will be more pro-active about it in the future. 

With the release of its minutes, in a section called “Market Policy Communications”, the Federal Reserve showed its plans to release 4 times annually its economic forecasts, and plans for the Fed Funds Rate. This signals in a shift in Federal Reserve transparency.

The Federal Reserve will begin including the forecast in its economic projections beginning after its next policy meeting, January 24-25, 2012.

Mortgage rates in Indiana were little changed after the release of the Fed Minutes.

Fed Funds Rate

Federal Reserve Announces New Twist to Stimulate Economy

The Federal Open Market Committee (FOMC) gathered for the 6th of eight scheduled meeting for 2011.

Since the last FOMC meeting in August, the economy failed to add any new jobs and the unemployment rates has remained above 9 percent. Growing fears of another recession have been fueled by the poor performance throughout every sector of the economy.

Economists and financial analysts worldwide have been on the edge of their seat waiting to hear how the FOMC intends to prevent another recession while keeping a lid on inflation.

Why should Northwest Indiana and Chicago Illinois home buyers and homeowners 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 committee had this to say about the economy.

Positive economic factors:

• Household spending has been increasing
• Inflation has moderated from earlier peaks
• Longer-term inflation expectations have remained stable

Negative economic factors:

• Economic growth remains slow
• Overall labor market conditions continue to weaken
• Unemployment rate remains elevated
• Household spending has flattened
• Investment in nonresidential structures is still weak
• Housing sector remains depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 7-3 in favor of:

1. extend the average maturity of its holdings of securities
2. reinvest principal payments from its holding of agency debt and agency mortgage-backed securities in agency mortgage-backed securities
3. maintain the target range for the federal funds rate at 0 – 0.250%

The Federal Reserve also elaborated on how they will extend the average maturity of its holdings of securities.

The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.

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

The Federal Reserve is running out of options and tools to foster maximum employment. The economy appears to be heading for another recession despite the best efforts of the US Treasury and Congress.

This new initiative (aka. Operation Twist) by the Federal Reserve appears to be a re-balancing of short-term debt and long-term debt on the Fed’s portfolio. The Fed is attempting to refinance their debt overall a longer time frame as to minimize the cash flow crunch in the same manner as consumers who refinance short-term debt into longer-termed mortgages.

At the end of the day, will the Fed have enough money to accomplish their objectives of paying bills while paying down the existing debt? Only time will tell. In the mean time, the Federal Reserve will take advantage of the low interest rate environment as well.

Likewise, home buyers and homeowners in Northwest Indiana and Chicago Illinois should capitalize on low home loan rates now before they end. Call or text me at 512-522-7284 to discuss your home loan options!

Fed Funds Rate

Federal Reserve Vows to Keep Low Rates Through Mid-2013

The Federal Open Market Committee (FOMC) gathered for the 5th of eight scheduled meeting for 2011.

The biggest announcement since the last FOMC meeting in June, which there have been many, is obviously the downgrade of the US credit rating by Standards & Poor’s over the weekend.

This downgrade has devalued the US dollar and has had immediate impact on stocks worldwide. Combine our domestic woes with the debt crisis in Europe and it is no surprise why stock investors are running scared.

Why should Northwest Indiana and Chicago Illinois home buyers and homeowners 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 committee had this to say about the economy.

Positive economic factors:

• Business spending on equipment and software continues to expand
• Longer-term inflation expectations have remained stable
• Underlying inflation has moderated from earlier peaks

Negative economic factors:

• Household spending has flattened
• Investment in nonresidential structures is still weak
• Overall labor market conditions deteriorating
• Housing sector remains depressed

Based on the Federal Reserves interpretation of the economy, the committee voted 7-3 in favor of:

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

The Federal Reserve also elaborated on how long a near zero percent Fed Funds Rate would last.

Committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

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

The Federal Reserve is running out of options and tools to foster maximum employment. The economy appears to be heading for another recession despite the best efforts of the US Treasury and Congress.

Even with the US credit downgrade, mortgage bonds are in high demand forcing home loan rates lower. It is hard to forsee how mortgage rates could get any lower based on everything that is happening domestically and worldwide. One hint of good economic news and mortgage rates could reverse course instanteously.

Therefore, home buyers and homeowners in Northwest Indiana and Chicago Illinois should take quick action to capitalize on low home loan rates before they end. Call or text me at 512-522-7284 to discuss your personal situation and your home loan options!

Fed Funds Rate

It’s Not What The Fed Did, But What The Fed Said Today

Today, in its first meeting in 5 weeks, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged. 

The Fed Fund Rate remains within its target range of 0.000-0.250 percent.

In its press release, the FOMC said that, since April, “the economic recovery is proceeding” and that the jobs market “is improving gradually”. Business spending “has risen significantly”, too, with the exception of commercial real estate.

Today’s statement is the 8th straight press release in which the Fed shows optimism for the U.S. economy, dating back to June 2009.  Since that time, the Fed has terminated all of the programs it created to support the economy through the economic crisis.

The recession is widely believed to be over.

And, although the Fed’s statement acknowledged economic growth, it did highlight lingering threats, too.

1. Employers are still reluctant to hire new workers
2. European debt concerns could spill-over to the U.S.
3. Bank lending is contracting

Also, as expected, the Fed re-affirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”, citing that “inflation has trended lower” recently.

Mortgage market reaction has been positive thus far. Mortgage rates in Illinois are slightly improved post-FOMC.

The FOMC’s next scheduled meeting is August 10, 2010.

Fed Funds Rate

The Federal Reserve, Greece and Mortgage Rates…Now What

The Federal Reserve adjourns from a scheduled, 2-day meeting today.  It’s one of 8 scheduled Fed meetings for 2010.

Upon adjournment, Fed Chairman Ben Bernanke & Co. will release a formal statement to the market. In it, the Fed is expected to announce “no change” in the Fed Funds Rate.

The Fed Funds Rate is currently in a target range of 0.000-0.250 percent.

The Fed Funds Rate is an inter-bank lending rate. It’s also the basis for Prime Rate, a consumer interest rate on which credit card payments are based, among other consumer loans.  Prime Rate is equal to the Fed Funds Rate + 3 percent.  Credit card rates, therefore, will likely stay flat today, too.

Mortgage rates, however, should change.  Possibly by a lot.  The 30-year fixed mortgage does not correlate with the Fed Funds Rate (as shown in the chart at right).

The reason mortgage rates will change today is because, in its statement, the Federal Reserve will highlight various parts of the economy, identifying strengths, weaknesses and probable threats to growth. 

These observations influence investors with a stake in bond markets and future returns and, with Wall Street on edge right now — unsure of whether recent economic growth is a longer-term trend or a short-lived blip –  mortgage rates could shoot higher or they could drop, depending on how traders interpret the Fed.

It’s a difficult time to be shopping mortgages in Northwest Indiana.

Further complicating matters is Greece’s recent debt downgrade to junk status. A small contagion fear is budding worldwide and, as a result, the flight-to-quality has picked up steam. Mortgage rates are down because of it but could reverse higher at any moment.

Therefore, if you’re actively shopping for a mortgage today, it may be prudent to lock your rate ahead of the Fed’s announcement and any major market reversal. Mortgage rates may fall today, but there’s very little room for them to fall.  This is, however, a lot of room for them to rise.

The Fed adjourns at 2:15 PM ET.  Call your loan officer to lock your rate.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Fed Funds Rate

What Exactly Is the Federal Reserve Trying to Tell Us

Yesterday, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its current target range of 0.000-0.25 percent.

In its press release, the FOMC noted that, since March, the U.S. economy “has continued to strengthen” and that the jobs markets “is beginning to improve”.  This is a step up from the last meeting after which the Fed said jobs were “stabilizing”. 

It also reiterated that business spending “has risen significantly”.

Yesterday’s statement marks the 7th straight press release in which the Fed shows optimism for the U.S. economy. Furthermore, the Fed has now closed all but one of the programs it created to support markets during last year’s financial crisis.

Threats remain to grow, however. The Fed fingered a few:

1. Employers are reluctant to hire new workers
2. High unemployment threatens consumer spending
3. Consumer credit (still) remains tight

Also in its statement, the Fed re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”.  This was expected.

Overall, the statement’s tone was positive and the Fed noted that inflation is within tolerance. 

Mortgage market reaction has been muted thus far. Mortgage rates in Crown Point Indiana are unchanged post-FOMC.

The FOMC’s next scheduled meeting is a 2-day affair, June 22-23, 2010.  The 55-day span between meetings will be the FOMC’s longest of 2010.

Contact James K Barath in Crown Point Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

Fed Funds Rate

Should You Lock Your Mortgage Rate In Advance Of Tomorrow’s Federal Reserve Announcement?

The Federal Open Market Committee starts a 2-day meeting today in Washington. 

The scheduled get-together ends at 2:15 PM ET Wednesday after which the FOMC will issue a press release to the markets.

Consider locking your mortgage in advance of the press release. 

The FOMC meets 8 times annually and its adjournments are among the biggest market-movers of the year. 

The Fed’s post-meeting press release is a direct look into the mind of the Federal Reserve and Wall Street is looking for clues anywhere it can find them.

After its August 2009 meeting, the FOMC said in its press release:

1. Financial markets have improved, relative
2. Household spending remains constrained
3. Although weak, the economy is “leveling off”

Since then, however, credit risks have lessened on Wall Street, consumer spending have shown signs of life and Fed Chairman Ben Bernanke said the recession is “very likely over”.

This is why tomorrow’s FOMC press release is so important.  Markets don’t expect the Fed to raise or lower the Fed Funds Rate, but they do expect the Fed to shed light on its next series of moves.

If the Fed alludes to inflation and stronger growth ahead, mortgage rates should rise. By contrast, reference to slower growth ahead should help keep rates steady.

The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent – the lowest it’s been in history.  However, it’s what the Fed says Wednesday that will matter more than what the its does.

If you’re floating a mortgage rate or wondering if the time is right to lock, the safe approach is to lock prior to 2:15 PM ET Wednesday.

Need more expert advice? Ask the team of Certified Mortgage Planning Specialists at Benchmark Mortgage.

Fed Funds Rate

Like To Play It Cautious? Consider Rate Locking Ahead Of Wednesday’s Federal Reserve Meeting

The Federal Reserve begins its scheduled two-day meeting this morning.

It’s one of 8 scheduled meetings for the Federal Open Market Committee this year.

When the FOMC meets, it discusses the financial and economic conditions around the country and, when appropriate, the group makes new policy meant to speed up or slow down the economy.

The main tool for reaching this goal is the Fed Funds Rate and, earlier this year, the FOMC lowered it to “near-zero” percent in an attempt to stimulate growth.

But the Fed has other tools at its disposal, too, not the least of which is its $1.25 trillion pledge to the mortgage markets.

Now, if you’ll remember, the Fed made that pledge in two parts:

• Part 1 came in November 2008 for $500 billion
• Part 2 came in March 2008 for $750 billion

After each announcement, mortgage rates reflexively dropped and stayed low for a period of a day or two. Then, fears of inflation set in on Wall Street, causing mortgage rates to pop back up because inflation is a mortgage-rate killer.

The Fed isn’t expected to increase its mortgage market commitment this week, but because mortgage rates are above the government’s “target zone”, it’s possible that the FOMC uses its post-meeting press release to give markets some guidance and its plan for the next several months.

A statement like this could alternately raise mortgage rates or lower them, depending on what the Fed says.

It’s for this reason that floating a mortgage rate through tomorrow afternoon is extremely risky. The Fed could say nothing about mortgages, or it could say a lot. Either way, a small, quarter-percent change in mortgage rates can add tens of thousands of dollars to the lifetime cost of a person’s pending home loan.

The Fed’s press release hits the wires at 2:15 PM ET Wednesday. If you’re the cautious type, consider locking your mortgage rate prior to its release.

Fed Funds Rate

Predicting The Federal Reserve’s Next Move: April 2009 Edition

The Federal Reserve meets next week for a policy-setting meeting.

It’s one of 8 scheduled Fed meetings this year in which the Federal Open Market Committee votes on whether to raise, lower, or leave unchanged the Fed Funds Rate.

Based on data compiled by the Federal Reserve Bank of Cleveland, Wall Street’s expectations of the Fed Funds Rate post-meeting are as follows:

• 97 percent probability that the Fed Funds Rate holds at 0.000 to 0.250%
• 3 percent probability that the Fed Funds Rate is raised to 0.750%.

There is no expectation for a 0.500% Fed Funds Rate.

The Fed Funds Rate influences the economy by changing borrowing costs for banks, businesses, and consumers. When the Fed Funds Rate is lowered, “cheaper money” is meant to speed the economy forward. When the Fed Funds Rate is raised, by contrast, costly borrowing tends to slow the economy down.

Changes to the Fed Funds Rate do not directly correlate to changes in mortgage rates.

Because Wall Street is nearly unanimous in its Fed Funds Rate prediction, though, expect the market’s FOMC focus to be on what the Fed says rather than what it does.

If Ben Bernanke & Co. express concerns about long-term inflation and the need to contain growth, mortgage rates will rise in response. On the other hand, if the Fed says that growth is expected to be within a tolerable range, mortgage rates should idle.

In other words, there’s little benefit in waiting for the Fed’s meeting to make your “Float or Lock” mortgage rate decision. In a worst-case scenario, mortgage rates rise. In a best-case scenario, they likely stay the same.

The Fed’s two-day meeting adjourns Tuesday, April 29 at 2:15 PM ET.

« Previous Page