Mar 10
16
Hear the FED Speak Today?… Here it is, in Plain Enlish
Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent. In its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period”. Fed Chairman Ben S. Bernanke is trying to determine how long to hold down borrowing costs to strengthen the recovery from the worst slump since the 1930s and to reduce joblessness persisting near a 26-year high. At the same time, policy makers are developing tools to tighten credit and ensure $1.2 trillion in excess bank reserves doesn’t stoke inflation.
In its press release, the FOMC also noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”. It also said that business spending has “has risen significantly”.
This is a slight departure from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.
It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning.
The economy is not without threats, however, and the Fed identified several:
1. High unemployment threatens consumer spending
2. Housing starts are at a “depressed level”
3. Consumer credit remains tight
The message’s overall tone, however, remained positive and inflation is within tolerance limits
Even bigger new for you and I in the mortgage world, Bernake also confirmed the end of its $1.25 trillion commitment to the mortgage market by March 31, 2010. This is huge for the Real Estate Mortgage Markets. See my earlier post FED Pulls Out in 37 Days: You Need to get Your Butt in Gear! from February 2010 for my thoughts. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.
Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates are unchanged this afternoon.
The FOMC’s next scheduled meeting is a 2-day affair, April 27-28, 2010.
