Posts Tagged ‘FOMC’

A Simple Explanation Of The Federal Reserve Statement (January 27, 2010 Edition)

Wednesday, January 27th, 2010

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.

There was no mention of the housing market’s strength.  The last 3 statements from the Fed included that specific verbiage.

It’s the fifth straight statement in which the Fed spoke about the economy with optimism.  This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.

The economy isn’t without threats, however, and the Fed identified several in its press release, including:

  1. Credit remains tight for consumers
  2. Businesses are reluctant to hire new workers
  3. Housing wealth is down

The message’s overall tone, however, remained positive and inflation appears is still within tolerance.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010.  This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.

Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates in los angeles are rising this afternoon.

The FOMC’s next scheduled meeting is March 16, 2010.

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What’s Ahead For Mortgage Rates This Week : January 25, 2010

Monday, January 25th, 2010

The FOMC meets this week -- mortgage rates will be volatileConforming and FHA mortgage rates improved last week on the combination of weaker-than-expected economic data and new anti-banking rhetoric from the White House.

The S&P 500 shed nearly 4 percent in its worst weekly showing since October 2009 as all 10 sectors fell. As the money left stock markets, it made its way to bonds — including the mortgage-backed variety.

As a result, illinois mortgage rates fell for the third straight week.

Since shedding 300 basis points in December, mortgage bond pricing has recovered a bit more than half of those losses.  It’s helping with home affordability and opening new refinance opportunities in los angeles and around the country.

This week, though, mortgage rates could rise back up.  There’s a lot going on.

First, on Monday, the December Existing Homes Sales report will be released.  The report is expected to be extremely weak as compared to November.  This is because of a combination of factors including:

  1. The initial tax credit expiration date of November 30, 2009
  2. Sharply rising mortgage rates throughout the month of December
  3. A general slowdown from the holidays and from the weather

Therefore, don’t be surprised by the newspaper headlines you see Tuesday morning.

Other data this week includes the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Case-Shiller Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same.  New Home Sales should be similarly strong.

But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010. 

The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely.  The Fed is not expected to change the Fed Funds Rate from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.

What the Fed says about the economy will be much more important that what it specifically does about the economy for now.  If the Fed says the economy is growing as expected, look for mortgage rates to rise. Conversely, if the Fed says the economy is at risk, expect mortgage rates to fall.

The safest rate lock strategy this week is to lock your mortgage rate before the Fed’s 2:15 PM ET adjournment Wednesday.  Rates will be bouncy all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.

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