Today’s FOMC statement’s language was basically the same as their January statement. The Federal Fund Rate will stay at this present level to help the economy continue to come out of this recession. The big difference in the language was with the housing industry and mortgage interest rates.
The housing industry has been slow to recovery in this recession. And with Building Permits and Housing Starts down for February, this part of the economy doesn’t seem to be pulling out. The Fed is now nearing the end, March 31, 2010, on their Mortgage Backed-Securities (MBS) purchasing program. They have purchased almost $1.25 Trillion in MBS. The Fed has stated repeatedly over the their last few meetings that they won’t continue with this program.
And though the Fed has always stated that they will continue to monitor the housing situation, they did add: “will employ its policy tools as necessary to promote economic recovery and price stability” to this FOMC statement. This some feel leaves the door open for the Fed to step back into purchasing MBS if the housing industry falters.
The concern over the Fed’s exit on purchasing MBS is that mortgage interest rates will climb. This in turn will depress the housing market more. So far we haven’t seen a climb yet in mortgage interest rates as we close in on March 30, 2010.
Inflation which has been a concern with traders and economists over the last few days due to ever expanding debt and increase spending from the government doesn’t seem to be an issue with the Fed.
The bond market ended up for the day. Tomorrow’s Producer Price Index and the Core Producer Price Index will be the released and will give us another read on inflation.
And as always, I will report daily on twitter @mmtgsolutions on the mortgage interest rates and what to expect for the day. If one of these reports moves the market in a significant manner, I’ll write about it here.
Please remember, I welcome your comments to this and my other posts.
To an inspiring week,
Betsy Moore
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