Arizona Mortgage » FOMC

A Simple Explanation Of The Federal Reserve Statement (March 15, 2011 Edition)

Mark Taylor — Tue, 15 Mar 2011 18:46:01 +0000

Today, for the second straight meeting, the Federal Open Market Committee voted unanimously to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.

The vote was 10-0.

In its press release, the FOMC noted that since its January 2011 meeting, the economic recovery “is on firming footing”, and that the labor markets are “improving gradually”. In addition, household spending “continues to expand”. Nonetheless, the Fed said, the economy remains constrained by rising commodity prices and the “depressed” housing sector.

The FOMC statement also re-affirms the group’s plan to keep the Fed Funds Rate near zero percent “for an extended period”, and to keep its $600 billion bond market support package — more commonly called “QE2″ — intact.

And, lastly, for the third straight time, the Federal Open Market Committee’s post-meeting release statement included a paragraph detailing the Federal Reserve’s dual mandate of managing inflation levels, and fostering maximum employment. Although it acknowledged inflationary pressures on the economy, the Fed said inflation remains too low for the economy currently, and that unemployment remains “elevated”.

In time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC has been negative since the statement’s release. Mortgage rates in Mesa are unchanged, but poised to worsen.

The FOMC’s next scheduled meeting is a 1-day event, March 15, 2011.

Your Mortgage Rate Strategy For Today’s FOMC Meeting

Mark Taylor — Tue, 15 Mar 2011 12:48:36 +0000

The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.

The FOMC’s official schedule calls for 8 meetings annually at which it reviews the nation’s economic and financial conditions, and chooses whether to change existing monetary policy.

The group’s last rendez-vous was a 2-day affair, January 25-26, 2011.

Today’s FOMC meeting represents a bona fide risk to home buyers and rate shoppers in Scottsdale and across the country. This is because when the Fed meets, Wall Street gets nervous which, in turn, causes mortgage rates to get volatile. And, as mortgage rates go, so goes home affordability.

Rate shoppers learned this the hard way after the FOMC’s last meeting.

In January, Wall Street deemed the Fed’s status quo message too soft on the looming threat of inflation. As a result, conforming mortgage rates rose through 7 of the next 10 days, driving pricing to its worst levels of the year.

This may happen again beginning today.

At 2:15 PM ET, the FOMC will adjourn and make a press release to the markets. The Fed is expected to keep the Fed Funds Rate near its target range of 0.000 percent, and to keep its $600 billion bond buy program in place. That doesn’t mean mortgage rates will idle, however.

Depending on the verbiage of the Fed’s statement, Wall Street will make its new bets. A tough approach on inflation should push mortgage rates down; a soft approach should pressure rates up. Either way, you may want to lock your mortgage rate prior to 2:15 PM ET — just to be safe.

Once the Fed adjourns, you’re at the market’s mercy.

Fed Minutes Show Lower Unemployment And Higher Growth For 2011 and 2012

Mark Taylor — Fri, 18 Feb 2011 13:47:01 +0000

The Federal Reserve released its January 25-26, 2011 meeting minutes Wednesday afternoon. Arizona mortgage rates have been in flux since.

Fed Minutes are comprehensive recaps of Federal Open Market Committee meetings; a detailed look at the debates and discussions that shape our nation’s monetary policy. As such, they’re released 8 times annually; 3 weeks after the most recent FOMC meeting.

Fed Minutes can be viewed as the unabridged version of the succinct, more well-known “Fed Statement” that’s released to markets immediately post-adjournment.

Just how much more lengthy are Fed Minutes?

The January 25-26, 2011 statement contains 395 words
The January 25-26, 2011 meeting minutes contains 6,916 words

If the Fed Statement is an executive summary, the Fed Minutes is a novel. And, the extra words matter.

When the Federal Reserve publishes its minutes, it’s offering clues about the group’s next policy-making steps. As an example, in the January minutes, the Fed improved its outlook for economic growth; lowered its projections for the Unemployment Rate; and removed its concern for deflation.

In addition, the Fed discussed the potential for food-and-energy-cost-induced inflation, but labeled it as a minor economic risk at this point in time.

Bond markets are mixed on the text of the Fed Minutes.

Although the Fed indicates a willingness to allow inflation to occur, it appears ready to act in case inflation goes too high. One way that the Fed responds to rising inflation is to raise the Fed Funds Rate and many economists believe this will start happening by late-2011 or early-2012.

A Simple Explanation Of The Federal Reserve Statement (January 26, 2011 Edition)

Mark Taylor — Wed, 26 Jan 2011 19:31:25 +0000

Today, the Federal Open Market Committee voted 10-to-0 to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that since December’s meeting, economic growth is ongoing, but at a pace deemed “insufficient” to make a material impact on the jobs market. In addition, the Fed said household spending “picked up” late last year, although it continues to be held back by joblessness, tight credit and lower housing wealth.

This is similar to the language used in the FOMC’s November and December 2010 statements.

Also like its last two statements, the Fed used this month’s press release to re-affirm its plan to keep the Fed Funds Rate near zero percent “for an extended period”, and to keep its $600 billion bond market support package in place.

And finally, of particular interest to home buyers and mortgage rate shoppers, for the second straight month, the Federal Open Market Committee’s statement contained an entire paragraph detailing the Federal Reserve’s dual mandate of managing inflation levels, while fostering maximum employment.

The Fed acknowledges progress toward this goal, but calls that progress “disappointingly slow”. Inflation is too low right now, and joblessness too high.

Over time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC has been positive since the statement’s release. Mortgage rates in Scottsdale are unchanged, but poised to improve.

The FOMC’s next scheduled meeting is a 1-day event, March 15, 2011.

The Fed Meets Today. What It Means To Mortgage Rates.

Mark Taylor — Tue, 25 Jan 2011 13:47:02 +0000

The Federal Open Market Committee begins a 2-day meeting today in Washington D.C. It’s the group’s first meeting of 2011 — one of 8 scheduled for the year.

The Fed meets every 45 days, on average. Its last meeting was December 14, 2010.

Rate shoppers and home buyers should make a note. Mortgage rates and home affordability could change dramatically beginning tomorrow afternoon.

Because Wall Street watches FOMC meetings closely, so should you. The meetings provide insight on the future of U.S. monetary policy, as told by the nation’s central banker. Investors make trades based on the FOMC’s commentary which is one reason why mortgage rates tend to undulate through the hours leading up to the FOMC’s adjournment, and the days immediately after.

Wall Street is shifting old bets, and placing new ones.

A terrific example of this is what happened after the Fed’s November 3, 2010 meeting.

In its post-meeting press release, the Federal Reserve announced a new, $600 billion, market-bolstering plan dubbed “QE2″. Wall Street had widely expected the Fed to create the program, but had underestimated its size.

Starting a $600 billion program sparked fears of a Fed-led inflation run, which, in turn, caused mortgage markets to deteriorate in a hurry. In the 3 days following the program’s announcement, mortgage rates spiked to multi-month highs and have not since recovered.

QE2 marked the beginning of the end of the Refi Boom and low rates. Today, conforming rates in Arizona are relatively low as compared to higher, but are much higher than they were prior to the FOMC’s November 2010 meeting.

Then, December’s FOMC meeting did little to change the direction of rates. We shouldn’t expect that January’s will, either. After the FOMC’s 2:15 PM ET adjournment Wednesday, mortgage rates should resume climbing, as they have done for the past 10 weeks.

If you’re shopping for a mortgage rate, therefore, the prudent move is to lock prior to Wednesday’s FOMC adjournment because, after once the Fed’s outlook is released, it will be too late.

A Simple Explanation Of The Federal Reserve Statement (December 14, 2010 Edition)

Mark Taylor — Tue, 14 Dec 2010 19:45:52 +0000

Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that since November’s meeting, the “economic recovery is continuing”, but at a pace deemed too slow to make a material impact on unemployment rates. It also said that household spending in increasing, but remains constrained by joblessness, tight credit and lower housing wealth.

In addition, the Fed used its press release to re-affirm its plan to keep the Fed Funds Rate near zero percent “for an extended period” while also opting to keep its $600 billion bond market support package in place.

And lastly, of particular interest to home buyers and mortgage rate shoppers, the FOMC statement devoted an entire paragraph to the Federal Reserve’s dual mandate of keeping inflation and employment at acceptable levels.

The Fed acknowledges making progress toward this goal, but calls it “disappointingly slow”. Currently, inflation is too low for what the Fed deems acceptable, and unemployment is too high.

Over time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC statement has been negative thus far. Mortgage rates in Scottsdale are unchanged post-FOMC, but appear poised to worsen.

The FOMC’s next scheduled meeting is a 2-day affair, January 25-26, 2011. It’s the first scheduled meeting of 2011.

Make A Mortgage Rate Strategy Ahead Of Today’s Fed Meeting

Mark Taylor — Tue, 14 Dec 2010 13:46:00 +0000

The Federal Open Market Committee holds a one-day meeting today, its 8th scheduled meeting of the year and 10th overall.

The FOMC is part of the Federal Reserve, the government group that sets U.S. monetary policy. The Fed’s primary policy-setting tool is an interest rate known as the Fed Funds Rate. The Fed Funds Rate is the interest rate at which banks borrow money from each other.

2 years ago Thursday, in an effort to jump-start the economy, the FOMC met and voted to lower the Fed Funds Rate to as close to zero percent as possible without actually going to zero percent; the benchmark rate was prescribed to a range of 0.000-0.250 percent.

The Fed Funds Rate had never been set so low before, but ever since, it’s been held to that range. It will likely be there until early-2011, too, but that doesn’t mean that mortgage rates won’t change today when the Fed adjourns today.

Because the Fed Funds Rate has been so low for so long, businesses and consumers have been able to borrow money cheaply. As a result, both capital and household spending have been on the rise lately, creating tailwinds for the economy.

The Fed is expected to acknowledge this today which, in turn, should lead mortgage rates higher. This is because, in the current recovery cycle and until markets find balance, what’s good for the economy tends to be bad for rates in Phoenix.

The Fed’s press release today will be a focal point for markets. Talk of higher-than-expected inflation or better-than-expected growth, and mortgage rates should rise. Talk of a slowdown should lead rates lower.

Either way, we can’t be certain what the Fed will say — or do — this afternoon. If you’re floating a mortgage rate, the safe move is to lock before 2:15 PM ET today.

A Simple Explanation Of The Federal Reserve Statement (November 3, 2010 Edition)

Mark Taylor — Wed, 03 Nov 2010 18:25:59 +0000

Today, the Federal Open Market Committee voted 9-to-1 to leave the Fed Funds Rate unchanged within in its target range of 0.000-0.250 percent.

In its press release, the FOMC noted that, since September’s meeting, the pace of economic and job growth “continues to be slow”. Housing starts are “depressed”, income growth is “modest” and commercial real estate investment is “weak”.

With respect to its prior economic stimuli, the Fed deemed the recovery “disappointingly slow”, while, at the same time, noting that growth will come.

The Fed also noted that inflation is running lower that what’s optimal, hinting at the potential for deflation.

Lastly, the Fed re-acknowledged its plan to hold the Fed Funds Rate near zero percent “for an extended period”, and also announced a new, $600 billion support package for the bond market. In most instances, a move like this would drive mortgage rates lower, but the Fed’s stimulus had been widely telegraphed, and $600 billion isn’t too far from the initial package estimates.

Mortgage market reaction has been muted thus far. Mortgage rates in Scottsdale are unchanged post-FOMC, but looked poised to worsen.

The FOMC’s next scheduled meeting is December 14, 2010 . It’s the last scheduled meeting of the year.

Mortgage Rate Lock Alert : Expect Rate Changes Wednesday Afternoon

Mark Taylor — Wed, 03 Nov 2010 12:45:49 +0000

The Federal Reserve ends a scheduled, 2-day meeting today. It’s the seventh of 8 scheduled Fed meetings in 2010, and the eighth overall this year.

The Fed held an unscheduled meeting May 9, 2010.

When today’s meeting adjourns, Fed Chairman Ben Bernanke & Co. will publish a formal statement within which the Fed is expected to announce “no change” to the Fed Funds Rate. But that doesn’t mean that mortgage rates won’t change.

To the contrary, expect mortgage rates to move by a lot this afternoon. Here’s why.

The Fed’s mission is to preserve stability within banking and the economy and, to achieve that goal, the Fed was bequeathed a number of powers by the U.S. government.

The most well-known of those powers is to right to set the Fed Funds Rate, the rate at which banks lend money to each other overnight.

Since December 2008, the benchmark Fed Funds Rate has been held in a range of 0.000-0.250 percent, the lowest possible range without going negative.

Now, when the Fed Funds Rate is low, it’s meant to loosen credit; to push the economy forward. And, by all accounts, the near-zero Fed Funds Rate is working. The recession ended and the economy is recovering.

However, the Fed has other stimulus-providing tools at its disposal and Wall Street expects the group to use them. This is where mortgage rates come into play.

Investors think the Fed will announce a new stimulus in its press release this afternoon and, dependent on the size of package, mortgage rates in AZ will either rise, or fall.

If the package is worth more than $500 billion, rates are expected to fall
If the package is worth less than $250 billion, rates are expected to rise

If the stimulus is somewhere in between, rates should idle.

Predicting mortgage rates is an inexact science, and guessing the Fed even moreso. Therefore, if you’re shopping for a mortgage rate right now, the prudent move is to lock it up prior to today’s 2:15 PM ET adjournment because, after to 2:15 PM ET, we can count on the Fed Funds Rate staying flat, but the same can’t be said for mortgage rates.

Call your loan officer this morning.

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