Oct 14, 2011 | Federal Reserve
Wednesday, the Federal Reserve released the minutes from its 2-day meeting September 20-21, 2011.
The release shows a divided Fed in disagreement about the current U.S. monetary policy. The group reached compromise for new economic stimulus, however, and maintained its commitment to accommodative interest rates.
Wall Street reacted tepidly to the minutes. Mortgage rates in Leominster worsened slightly post-release.
The Fed Minutes gets less press than the FOMC’s post-meeting press release, but it’s every bit as important. Because it details the conversations that take place among voting and non-voting Fed members at FOMC meetings, the Fed Minutes is an inside-look at the debates and discussion that lead to new monetary policy.
As examples, here are some of the topics covered at the September FOMC meeting :
- On growth : Economic growth was slow, but “did not suggest a contraction”
- On housing : The market continues to be “depressed by weak demand”
- On rates : The Fed Funds Rate will remain low until mid-2013
Then, with Fed members divided on whether the central bank should add new stimulus, it reached a compromise instead, launching the $400 billion “Operation Twist” program. Operation Twist is meant to lower longer-term interest rates, including mortgage rates.
Since Operation Twist began, mortgage rates are higher by nearly 0.375%.
Also noteworthy within the Fed Minutes was concern for an economic slowdown and how the Federal Reserve may react. According to the record, a slowdown may prompt the Fed to introduce its third round of qualitative easing, or QE3. An out-sized stimulus plan would likely lead rates higher.
Nothing will happen until the Fed’s next meeting, however. Chairman Ben Bernanke & Co meet next November 1-2 for a 2-day meeting..
Sep 21, 2011 | Federal Reserve
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 7-3 — the second straight meeting at which the FOMC adjourned with as many 3 dissenters. Prior to that last meeting, there hadn’t been 3 FOMC dissenters since 1992.
In its press release, the Federal Reserve presented a dour outlook for the U.S. economy, noting that since its last meeting in August:
- Economic growth “remains slow”
- Unemployment rates “remain elevated”
- The housing sector “remains depressed”
The Fed also said that there are “significant downside risks” to the economic outlook, tied to strains in the global financial markets.
The news wasn’t all bad, however. (more…)
Sep 21, 2011 | Federal Reserve
The Federal Open Market Committee adjourns from a two-day, scheduled meeting today, the sixth of 8 scheduled meetings this year, and the seventh Fed meeting overall.
The FOMC is a designated, 12-person committee within the Federal Reserve, led by Fed Chairman Ben Bernanke. The FOMC is the voting members for the country’s monetary policy. Among its other responsibilities, the FOMC sets the Fed Funds Rate, the overnight rate at which banks borrow money from each other.
Note that the “Fed Funds Rate” is different from “mortgage rates”. Mortgage rates are not set by the Fed. Rather, they are based on the price of mortgage-backed bonds, a security traded among investors.
As the chart at top illustrates, the Fed Funds Rate and conforming mortgage rates in Fitchburg have little correlation. Since 1990, the two benchmark rates have been separated by as much as 5.29 percent, and have been as close as 0.52 percent. (more…)
Aug 31, 2011 | Federal Reserve, Interesting Stuff, Legislation, Mortgage Rates
The Fed publishes meeting minutes 8 times annually — three weeks after each scheduled Federal Open Market Committee get-together. The Fed Minutes summarizes the FOMC meeting.
The Federal Reserve released the minutes from its August 9, 2011 Federal Open Market Committee meeting Tuesday.
The Fed Minutes contained no surprises and, as a result, mortgage rates across Massachusetts and nationwide have idled.
Although it gets less press attention, the Fed Minutes is every bit as important as the more highly-publicized, post-meeting statement from the FOMC. With its detailed record of conversation, the Fed Minutes highlights the discussions and debates that shape our nation’s monetary policy.
For example, here is some of what was said at the Fed’s August 2011 meeting :
- On growth : Economic growth had been slower than the committee expected
- On housing : The market “remains depressed”. Underwriting standards are “tight”.
- On rates : The Fed Funds Rate will remain low until mid-2013
In addition, the Fed talked about whether a third round of asset purchases should be announced. Ultimately, that plan was rejected by consensus.
The FOMC’s next meeting is a 2-day meeting, scheduled for September 20-21. The meeting was originally scheduled for just one day, but Fed Chairman Ben Bernanke chose to extend it to two. Wall Street believes that the extension was made so Fed members could discuss new forms of economic stimulus. (more…)
Aug 9, 2011 | Federal Reserve
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 7-3 — the first time in 5 meetings that the nation’s Central Bank was non-unanimous and the first time since 1992 that the FOMC adjourned with as many as three dissenters.
In its press release, the FOMC had little good to say about the U.S. economy, noting that since its last meeting in June:
- Growth has been “considerably slower” than expected
- Labor market conditions have deteriorated
- Household spendng has “flattened”
The Fed also noted that the housing sector remains depressed. (more…)
