Archive for the 'Federal Reserve' Category
The Fed lowered the Fed Funds Rate by 0.750% to 2.250% yesterday.
Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.750% yesterday. Prime Rate is now to 5.250%.
Holders of home equity lines of credit and credit card debt benefited from the change and will see lower interest costs in next month’s statements.
Mortgage rate shoppers didn’t.
In the statement above — as explained by The Wall Street Journal — the Fed expresses a growing concern of inflation from rising commodity prices such as oil. In part, this caused the mortgage bond market to sell off immediately following the press release’s issue.
Mortgage rates rose close to a quarter-percent yesterday.
The Federal Open Market Committee’s statement leaves the possibility of future Fed Funds Rate cuts open. The FOMC’s next scheduled meeting is a two-day affair April 29-30, 2008.
Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2008
https://online.wsj.com/internal/mdc/info-fedparse0803.html
With Friday’s jobs report looming, mortgage markets are especially skittish about whether the economy is in a recession, or facing inflation.
Four Fed speakers Tuesday did little to quell the debate:
- 9:00 A.M.: Fed Chairman Bernanke stayed on message that foreclosures and falling home values are dragging down the economy.
- 10:00 A.M.: Fed Vice Chairman Kohn said that banks will “face challenges” but will not fail en masse.
- 1:00 P.M.: Federal Reserve Governor Mishkin said that deflation is more concerning to him than inflation
- 1:00 P.M.: Dallas Fed President Fisher said fighting inflation is more important than fighting recession.
Four speeches, four different perspectives.
The speakers’ mixed messages confused market participants and, as a result, mortgage rates varied wildly from hour to hour.
The confusion was so great that several mortgage lenders had to shut down their rate lock desks on three separate occasions Tuesday to re-price rates to the “new” market.
That’s a highly unusual occurrence and the market’s volatility underscored the uneasiness exiting in mortgage markets lately. Without a clear picture of where the economy is headed, investors are left to guess (and they’re not very sure of themselves).
Friday’s job report may add some clarity, but until Friday comes, consider locking a mortgage rate if you see one you like – it probably won’t stick around for very long.
The Fed lowered the Fed Funds Rate by 0.500% to 3.000% yesterday. The move was widely anticipated and so Wall Street’s reaction was muted.
Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.500% yesterday. Holders of home equity lines of credit and credit card debt benefited from the change and will see lower interest costs in next month’s statements.
In the statement above — as explained by The Wall Street Journal — the Fed expresses concern about the housing and jobs markets, while noting that inflation is less of a worry. This leaves the possibility of future Fed Funds Rate cuts open.
Source
Parsing the Fed Statement
The Wall Street Journal Online
January 30, 2008
https://online.wsj.com/public/resources/documents/info-fedparse0801b.html
When the Federal Open Market Committee adjourns from its two-day meeting today, it is widely expected to lower the Fed Funds Rate.
This does not mean that mortgage rates will fall.
In fact, using history as an indicator, we should expect mortgage rates to rise if the Fed Funds Rate falls.
Remember: The Fed Funds Rate is an overnight interest rate between banks; mortgage rates are long-term rates based on the bond market. These are two very different animals.
The FOMC’s press release hits the wires at 2:15 P.M. ET.
As promised, last week was heavy on data and on drama. And mortgage rates continued their slide lower.
This week, by contrast, is devoid of data and markets are already digesting the Federal Reserve’s surprise 0.750% rate cut this morning.
Mortgage rates are falling in response, but not because of what the Fed did as much as what the Fed implied by doing it.
The Federal Reserve does not control mortgage rates, per se, but it does exert an influence. This is because when the Federal Open Market Committee makes changes to the Fed Funds Rate, it is making a broader statement about the health of the economy.
This morning, and in advance of its 2-day meeting January 29-30, the Federal Reserve chopped the Fed Funds Rate by 75 basis points to 3.500%. This signals to markets that the Federal Reserve is keen on engineering a soft landing for the economy.
Read the rest of this entry »
