Category: FOMC
Federal Open Market Committee Update
| September 21, 2011 | Posted by Tammy under FOMC |
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The Federal Open Market Committee (FOMC) concluded its two day meeting today with a 7-3 vote to leave the Fed Funds Rate (the rate at which lending institutions lend to each other) unchanged within its current target range of 0.00%-0.25%. This Fed press release sheds some light on the FOMC’s current observations of the market and how it will be adjusting its activities moving forward.
From the FOMC Press Release:
Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.
Since the Fed sets monetary policy and participates in other activities such as buying Treasury debt, their activities can significantly impact the mortgage rates and the economy as a whole. As the Fed has implemented various policies to help push the economy out of recession, maintaining these policies for an extended period of time can do more damage than good.
FOMC Meeting Takeaways
- Moving forward with “Operation Twist”: This economic policy may lead to even lower mortgage rates. In short, the Fed is purchasing more long-term securities in an attempt to keep downward pressure on long-term interest rates, which also affects mortgage rates.
- Unemployment “remains elevated”
- Investment in non-residential structures is “weak”
- Business Investment in equipment and software continues to “expand”
- Inflation appears to have “moderated”
- Economic growth “remains slow”
- The housing sector “remains depressed”
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