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Rates Improve! A Simple Explanation Of The Fed Statment Today

25 Jan

Putting the FOMC statement in plain EnglishWednesday, the Federal Reserve’s Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent. To add impact, the Fed has indicated that they will “likely not raise interest rates until at least late 2014”.

The Fed Funds Rate has been near zero percent since December 2008. To be fair, on Jan 13th we saw rates at their lowest mark in over a year, only to see them deteriorate over the last week and a half. With the Fed news today, we are seeing a marked improvement – but not to the levels we saw January 13th.

For the third consecutive month, the Fed Funds Rate vote was nearly unanimous. Just one FOMC member dissented in the 9-1 vote, objecting only to the language used in the Fed’s official statement.

In its press release, the Federal Reserve noted that the U.S. economy has “expanding moderately” since its last meeting in December 2011, adding that the growth is occurring despite “slowing in global growth” — a reference to ongoing economic uncertainty within the Eurozone. In a nutshell, the Fed is sending the signal that our economy is still in the gutter and needs help.

The Federal Reserve expects moderate economic expansion through the next few quarters but is wary of “strains” from global financial markets, and these three threats to the U.S. economy :

  1. The housing sector remains “depressed”
  2. The unemployment rate remains “elevated”
  3. Fixed business investment has “slowed”

On the positive side, the FOMC said that household spending is rising and inflation remains in-check. The group also believes that employment will gradually improve nationwide going forward.

The Federal Reserve neither introduced new economic stimulus, nor discontinued existing market programs.

Immediately after the FOMC’s statement, mortgage markets rallied, pressuring mortgage rates to fall in and around Sacramento. It was a knee-jerk reaction and improvement, that has since come back to earth a bit.

Mortgage rates remain near all-time lows and, for homeowners willing to pay points plus closing costs, conventional, 30-year fixed rate mortgages can be locked at below 4 percent. If you’re in the process of buying or refinancing a home in California , it’s a good time to lock a mortgage rate with your lender.

The FOMC’s next scheduled meeting is a one-day event slated for March 13, 2012.

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1 Comment

Posted by on January 25, 2012 in Federal Reserve

 

Tags: , , , , , , , ,

One response to “Rates Improve! A Simple Explanation Of The Fed Statment Today

  1. Alex

    January 29, 2012 at 6:03 pm

    Hi, Dan Tharp, Great information! I do love the way you have talked about this particular issue.

     

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