FOMC Press Release

A Simple Explanation of the Federal Reserve Statement (June 24th Edition)

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent.

The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the U.S. economy is not slowing with the same speed versus just two months ago and that financial markets, in general, are improving.

These are two signs that the country may be emerging from recession, if it hasn’t already.

The news isn’t all good, however. The Fed made a point to highlight the potential hazards the nations faces on its path to economic recovery:

• The prices of energy and commodities have been rising
• Job losses are still mounting nationally
• Businesses are reducing capital expenditures

Also in its statement, the Fed acknowledged a plan to hold the Fed Funds Rate near zero percent “for an extended period” and a re-commitment to the U.S. Treasury and Mortgage Bond markets.

Market reaction to the Fed’s press release has been muted.

With no new stimulus and no new “tools” to spur the economy unveiled, Wall Street is business as usual. Mortgage rates are unchanged post-FOMC today.

The FOMC’s next scheduled meeting is August 11-12, 2009.

FOMC Press Release

Explaining What the Federal Reserve Did in Plain English

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today within its target range of 0.000-0.250 percent. The Fed also reiterated its plan to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the economy may still be contracting, but that it’s not happening with the same speed as in prior months. Household spending is stabilizing and financial markets are “easing”.

Nevertheless, threats to the recovery are everywhere with the following items on the Fed’s short list:

• The growing ranks of unemployed workers
• The reduction of housing wealth nationally
• Reduced inventories and investment from business

Furthermore, the FOMC fingered today’s inflation levels as too low to support economic growth. This justifies the Fed’s plan to hold the Fed Funds Rate near zero percent “for an extended period”.

For home buyers and refinancing homeowners, today’s press release was not favorable.

After the Fed’s announcement, stock markets rallied on the idea that the worst of the economy really is over and that led to a broad bond market sell-off. Mortgage rates spiked in response, adding as much as 0.125 percent, in some cases.

The FOMC’s next scheduled meeting is June 23-24, 2009.

Source
Parsing the Fed Statement
The Wall Street Journal Online
April 29, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0904.html

FOMC Press Release

Explaining What the Federal Reserve Did in Plain English

The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged today, within the target range of 0.000-0.250 percent. This doesn’t mean the Fed stood pat, however.

On plan to resurrect the economy using “all available tools”, today, the Fed announced a new, $1.5 trillion round of fiscal support for the treasury and mortgage markets.

The stimulus will likely be Thursday morning’s headline story.

In its press release, the FOMC touched upon a few of the prevailing economic issues, using these points as a legitimizing backdrop for its newest debt load:

• Job losses and wealth loss are dragging down consumer spending
• Some U.S. trading partners are falling into recession
• Businesses are cutting back on investment and inventory

Of interest is that the FOMC said today’s inflation levels may be too low to support economic growth at all. This condition is more commonly called deflation. The Fed’s latest actions, therefore, may be a deliberate attempt to induce inflation through unprecedented borrowing.

For home buyers and potential refinancers, this is terrific news — at least in the short-term. By introducing new demand for mortgage bonds, the Fed will help pressure mortgage rates lower. Already yesterday afternoon, mortgage rates fell and they will continue to fall until the market reaches a new equlibrium.

After the Fed’s last intervention, markets reached their balance point in about a day-and-a-half.

Source
Parsing the Fed Statement
The Wall Street Journal OnlineMarch 18, 2009
http://online.wsj.com/public/resources/documents/info-fedparse0903.html

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