Archive for FOMC
Is More Fed-Led Stimulus On Its Way?
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The Federal Open Market Committee released its April 2012 meeting minutes this week, revealing a Federal Reserve in the ready in the event additional monetary stimulus is needed.
The Fed Minutes function much like the minutes from a business meeting; or, condominium association meeting, for example. It’s a detailed review of the conversations and debates between FOMC members, and is typically published 3 weeks after a Federal Reserve meeting.
The Fed Minutes is a follow-up statement on the FOMC’s more well-known, post-meeting press release. It’s also much more lengthy.
Whereas the April 25, 2012 press release totaled 444 words, the Fed Minutes spanned 6,618.
Those extra words are important, too, because the detail offered within the Fed Minutes lends insight into how our nation’s central bank views the U.S. economy, its strengths and weaknesses, and its threats.
From the Fed Minutes, some of the Fed’s comments includes :
- On employment : Unemployment may remain elevated through 2014
- On housing : Tight underwriting is “holding down” the housing market
- On rates : The Fed Funds Rate should remain low until late-2014
There was also substantial talk about Europe and its role in the U.S. economy. Notably, U.S. financial institutions have been actively reducing their European exposure to contain damage in the event of a full-blown economic crisis abroad.
This has had the net effect of lowering mortgage rates in Wisconsin. Mortgage bonds often benefit from economic uncertainty.
In addition, because several Fed members acknowledged a willingness to add new stimulus to the U.S. economy, mortgage markets are accounting for the possibility it could happen. It’s unclear whether stimulus would be added after the Fed’s next meeting, or at some point later in the year, or at all.
The FOMC has its next scheduled meeting June 19-20, 2012.
What’s Ahead For Lake Geneva Real Estate Mortgage Rates This Week: April 23, 2012
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Lake Geneva real estate mortgage markets were mostly unchanged last week, breaking a three-week winning streak. Wall Street grappled with surprising demand on Spain’s debt issuance and a series of weaker-than-expected data points on U.S. housing.
Conforming mortgage rates across Wisconsin rose slightly according to the weekly Freddie Mac Primary Mortgage Market Survey.
Nationwide, the 30-year fixed rate mortgage rate climbed 2 basis points to 3.90%. This rate is available to homeowners willing to pay 0.8 discount points and a full set of closing costs, where 1 discount point is equal to 1 percent of the borrowed amount. Once again, Walworth State Bank doesn typically charge any points on their loans.
Prior to last week’s survey, just 0.7 discount points were required.
This week, mortgage rates are expected to be volatile. There is a lot of economic data due for release, the Eurozone’s issues with sovereign debt remain unresolved, and the Federal Open Market Committee gets together for a scheduled, 2-day meeting.
On the data front, the week starts with Tuesday’s Consumer Confidence figures and the government’s New Home Sales report. Both have the power to move mortgage rates. The week then concludes with the Pending Home Sales Index; the GDP release; and a series of Treasury auctions.
With respect to Europe, demand remains strong for debt from Spain, but at much higher rates as compared to several weeks ago. The same is true for Italy. Both nations are feared to be at risk of default on their respective sovereign debt. It’s a similar situation to that which occurred in Greece throughout 2011.
Long-term, lingering concerns for Spain and Italy would likely help keep U.S. mortgage rates suppressed.
And, lastly, the Federal Reserve will make a statement to markets Wednesday afternoon. The Fed is the nation’s central banker and its post-meeting press releases have tremendous influence on bond markets, including those for mortgage-backed bonds.
By extension, therefore, the Federal Reserve’s statement has the power to move Lake Geneva mortgage rates.
If you’re shopping for mortgage rates, it’s as good of a time as any to lock with your lender. Rates have more room to rise than to fall.
Federal Reserve Wary Of European Spillover
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The Federal Reserve has released the minutes from its 2-day meeting January 24-25, 2012.
The Fed Minutes is a summary of the conversations and debates that shape our nation’s monetary policy. It receives less attention than the Fed’s more well-known, post-meeting press release, but the Fed Minutes is every bit as important.
To rate shoppers in Delavan , for example, the Fed Minutes can provide clues about whether mortgage rates will generally rise or fall in the coming months.
The most recent Fed Minutes reveals a central bank divided on the future of the U.S. economy. The minutes show some Fed members in favor of new, immediate market stimulus. It shows others in favor of terminating the stimulus that’s already in place.
The Fed’s debate centered on the topic of inflation, and the pressures that a prolonged, near-zero Fed Funds Rate can place on the economy. Ultimately, the Fed did nothing, neither adding new stimulus nor removing that which is already in place.
It did, however, communicate a plan to keep the benchmark Fed Funds Rate rate “exceptionally low” through late-2014, at least.
The Fed Minutes included the following notes, too :
- On employment : Unemployment rates will “decline only gradually” in 2012
- On housing : The market is “held down” by the “large overhang” of distressed homes
- On inflation : Consumer prices have remained “flat”
Furthermore, the Fed expressed optimism regarding European financial markets, noting that market sentiment “appeared to brighten a bit”. Nonetheless, “spillovers” remain possible and the threat continues to weigh on markets.
Mortgage rates are slightly worse since the Fed Minutes were released.
The Federal Reserve’s next scheduled meeting is March 13, 2012 — its second of 8 scheduled meetings this year.
What’s Ahead For Mortgage Rates This Week : January 30, 2012
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Mortgage markets improved last week as news from the Federal Reserve, the U.S. economy, and Europe combined to spur new demand for mortgage-backed bonds.
Conforming mortgage rates rallied from Wednesday through Friday’s close, ending the week near all-time lows set earlier this year.
Last week’s rally was sparked by the Federal Open Market Committee.
After its first meeting of the year, Chairman Ben Bernanke & Co. changed its projection for “exceptionally low rates” to at least late-2014. Previously, the Fed had said its benchmark Fed Funds Rate would remain low until 2013.
This, in conjunction with the Fed’s message that further economic stimulus may be coming, led Wall Street investors to increase their bets on mortgage bonds, pushing up prices and pushing down yields.
Lower yields means lower rates.
Mortgage rates were also helped lower by mixed data on the U.S. economy including weaker-than-expected housing reports, and another setback in the Greece sovereign debt negotiations.
Each time that Eurozone leaders have failed to reach an expected accord with Greece since 2010, mortgage rates have dropped. Last week was no different.
This week, with a large amount of U.S. economic data due for release and a high-profile summit among European Union leaders, mortgage rates are poised to move. Unfortunately, we can’t know in which direction.
Some of the news that will move markets include :
- Monday : Personal Consumption Expenditures
- Tuesday : Consumer Confidence; Case-Shiller Index
- Wednesday : Construction Spending
- Thursday : Weekly Jobless Claims
- Friday : Non-Farm Payrolls;Factory Orders
Of all of the economic releases, Friday’s Non-Farm Payrolls has the most potential to move markets. More commonly called “the jobs report”, Non-Farm Payrolls details the monthly change in national employment and the national Unemployment Rate.
Jobs are believed to be the key to U.S. economic recovery so strength in jobs should result in higher mortgage rates throughout Wisconsin and the country.
Mortgage rates remain very low. If you’re nervous about mortgage rates rising this week or next, it’s as good of a time as any to lock your rate with a lender, and start moving toward closing.
A Simple Explanation Of The Federal Reserve Statement (January 25, 2012)
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Wednesday, 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.
The Fed Funds Rate has been near zero percent since December 2008.
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 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.
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 :
- The housing sector remains “depressed”
- The unemployment rate remains “elevated”
- 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 following the FOMC’s statement, mortgage markets rallied, pressuring mortgage rates to fall in and around Williams Bay.
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 Wisconsin , 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.
The Federal Reserve Meets Today : Mortgage Rates Expected To Move
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The Federal Open Market Committee adjourns from a scheduled 2-day meeting today, its first of 8 scheduled meetings this year.
The FOMC is a designated, rotating, 12-person committee within the Federal Reserve, led by Federal Reserve Chairman Ben Bernanke. Members of the FOMC sub-committee are the voting members of the Federal Reserve; the ones that ultimately determine U.S. monetary policy.
The most well-known Federal Reserve monetary policy tool is the central bank’s Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other for a period of one night.
The Fed Funds Rate can only be changed by FOMC vote.
For home buyers and would-be refinancing households in Delavan , it’s important to recognize that the Fed Funds Rate is an interest rate separate and distinct from “mortgage rates”. Mortgage rates are not voted upon by the Federal Reserve. Rather, mortgage rates are based on the price of mortgage-backed bonds, a security bought and sold among investors.
Historically, there is little correlation between the Fed Funds Rates and 30-year fixed rate mortgage rates throughout Wisconsin. Going back 20 years, the benchmark rates have been separated by as much as 5.29% and have been as near as 0.52%.
The spread has even gone negative, most recently in 1979 and 1981 — a period marked by high inflation.
Today, the separation between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate is roughly 3.60%. Beginning at 12:30 PM ET, however, that spread is expected to change. The FOMC will make its statement to the press at that time, and will release its quarterly forecast to the markets.
As Wall Street reacts to the Fed’s press release and projections, mortgage rates will move.
Investors expect the Fed to vote the Fed Funds Rate unchanged from its current range near 0.000 percent, but are unsure of how the Fed will characterize the U.S. economy. If the Fed speaks optimistically on the economy, stock markets should rise and mortgage bonds should fall, driving mortgage rates higher.
Conversely, if the Fed shows concern for future economic growth, mortgage rates should drop. Either way, today figures to be volatile one for mortgage markets.
When mortgage markets get volatile, the safe play as a rate shopper is to lock your mortgage rate immediately. There too much risk in floating.
A Simple Explanation Of The Federal Reserve Statement (December 13, 2011 Edition)
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Tuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The vote was nearly unanimous for the second straight month. Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.
In its press release, the Federal Reserve sais that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.
The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.
Other potential soft spots within the economy include :
- A slowdown in business investment
- A “depressed” housing market
- Strains in global financial markets
The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.
Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates in Lake Geneva real estate little reason to rise or fall.
Mortgage rates remain near all-time lows and, for homeowners willing to pay points + closing costs, 30-year fixed rate mortgages can be locked at less than 4 percent. If you’re thinking of buying or refinancing a home, it’s a good time to lock a mortgage rate.
The FOMC’s next meeting will be its first scheduled meeting of the new year. The meeting is slated for January 24-25, 2012.
What’s Ahead For Mortgage Rates This Week : December 12, 2011
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Mortgage markets were mostly unchanged for the 6th consecutive week last week as Wall Street’s uncertainty regarding the future of U.S. and global economies remain.
Mortgage bonds made gains made through the early part of the week, which caused mortgage rates in Wisconsin to drop Monday through Wednesday afternoon. Those gains were erased, however, as 23 of 27 Euro leaders reached agreement on fiscal coordination and budget planning, sparking optimism for the future of the Eurozone, in general.
Mortgage rates rose Thursday and Friday.
This week, the momentum may continue. The main story we’ll be watching is the Federal Open Market Committee’s Tuesday meeting — its 8th scheduled meeting of the year and its last until 2012.
When the Fed meets, mortgage rates are often volatile.
At its meeting, the FOMC is expected to vote the Fed Funds Rate unchanged within its current range near zero percent. However, it won’t be the Fed’s vote on the Fed Funds Rate that changes markets. Wall Street is keyed in to two other elements, instead.
The first element is the verbiage of the FOMC’s press release to markets. Issued upon adjournment, the FOMC’s press release identifies strengths and weaknesses in the U.S. economy, and offers an outlook for the future plus potential threats. The “tone” of the press release can change how mortgage bonds trade.
If the Fed describes an economy in recovery with few threat to growth, mortgage rates are likely to rise post-FOMC. By contrast, if the Fed says the economy has slowed, mortgage rates should fall.
The second element on which Wall Street is focused is the likelihood of new, Fed-led economic stimulus. Should the Federal Reserve modify existing support programs, or introduce new ones, mortgage rates are sure to shift. Unfortunately, we can’t know in which direction — it will depend on the size of the program and its expected impact on the U.S. economy.
The Fed adjourns Tuesday at 2:15 PM ET.
Beyond the Fed, there is other rate-moving news, too, including Tuesday’s Retail Sales report, Thursday’s Producer Price Index, and Friday’s Consumer Price Index. Each has the capacity to change mortgage rates throughout Lake Geneva real estate so if you’re floating a mortgage rate, it may be a good time to lock one in.
Freddie Mac reports the average 30-year fixed rate mortgage at 3.99% with 0.7 discount points, plus closing costs.
A Simple Explanation Of The Federal Reserve Statement (November 2, 2011 Edition)
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Wednesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
The vote was nearly unanimous, with just one dissenting voter. There were 3 dissenters at each of the FOMC’s last two meetings.
In its press release, the Federal Reserve presented an improved outlook for the U.S. economy, noting that since its last meeting in September, there’s new evidence that the economy “strengthened somewhat” in the third quarter.
One example cited is that consumer and business spending continues to rise while inflationary pressures on the economy remain modest. This indicates controlled growth — a plus in a recovering economy.
The economy remains slowed by a number of factors, though, as noted by the Fed :
- “Continuing weakness” in the labor market
- Softness in commercial real estate
- A “depressed” housing market
In response to mixed economic conditions, the FOMC opted to “do nothing” today; it introduced no new monetary policy, and revised none of its existing market stimulus. The Fed re-iterated its plan to leave the Fed Funds Rate in its current range near 0.000 percent “at least until mid-2013″ and affirmed “Operation Twist” — the program in which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.
Mortgage market reaction to the FOMC statement has been negative this afternoon. Mortgage rates throughout Wisconsin are rising because analysts expected the Fed to launch new, bigger stimulus plans. It didn’t. Rates may drift higher for the new few days, too.
Therefore, it today’s mortgage rates fit your household budget, consider locking in a mortgage rate. Mortgage rates are very low right now, relative to history. It may not last.
The FOMC’s next meeting — its last scheduled meeting of the year — is December 13, 2011.
Make Your Mortgage Rate Strategy : The Federal Reserve Starts A 2-Day Meeting
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The Federal Open Market Committee begins a scheduled, 2-day meeting today, the seventh of its 8 scheduled meetings this year, and the eighth Fed meeting overall.
The FOMC is a 12-person sub-committee within the Federal Reserve. It’s the group responsible for setting the nation’s monetary policy and is led by Federal Reserve Chairman Ben Bernanke.
The FOMC’s most well-known role is as the steward of the Fed Funds Rate. This is the overnight rate at which U.S. banks borrow money from each other. The Fed Funds Rate is a unique, “banking” interest rate, and should not be confused with consumer interest rates, a category which includes ”mortgage rates”.
Mortgage rates are not set by the Federal Reserve.
Rather, mortgage rates are based on the price of mortgage-backed bonds. If mortgage rates correlated to the FOMC’s Fed Funds Rate, the chart at right would be linear.
That said, the FOMC does exert influence on mortgage markets.
After its FOMC meetings, the Federal Reserve issues a press release to the public. In it, the central banker summarizes economic conditions nationwide, highlighting threats to the economy and areas of strength.
When the Federal Reserve’s statement is generally “positive”, mortgage rates tend to rise. This is because a strengthening economy invites investors to assume more risk, spurring equity markets at the expense of all bonds types, including the mortgage-backed kind.
When bond markets lose, mortgage rates rise.
Conversely, when the Fed is generally negative, bond markets gain, pushing mortgage rates lower throughout Wisconsin.
The Fed can also influence mortgage rates via new policy.
At its last meeting, the FOMC launched a new, $400-billion round of mortgage-market stimulus known as Operation Twist. The added mortgage-bond support led mortgage rates lower post-FOMC meeting.
The Fed may expand Operation Twist as soon as Wednesday afternoon. It may also take no such steps at all. Unfortunately, there are few clues about what the Federal Reserve may do next, if anything at all. As a result, mortgage rates will be a moving target for the next 36 hours. First, they’ll be volatile before of the Fed’s statement. Then, they’ll be volatile after the Fed’s statement.
Even if the Fed does nothing, mortgage rates will change so your safest play is to lock a mortgage rate ahead of Wednesday’s 2:15 PM ET adjournment.
There too much risk in floating.