Comments Off on How The Fed’s Words Should Trump The Fed’s Actions Today

How The Fed’s Words Should Trump The Fed’s Actions Today

2008
06.25

The Federal Open Market Committee adjourns from its 2-day meeting at 2:15 P.M. ET today. It’s widely expected that the group will leave the Fed Funds Rate unchanged at 2.000 percent.

However, it’s not what the Fed does today that has markets so interested. It’s what the Fed will say.

One of the Federal Reserve’s roles is to promote stability in the U.S. economy by protecting it from two major threats:

  1. Inflation
  2. Recession

The Federal Reserve’s primary weapon against both of these hazards, though, is the same — the Fed Funds Rate. To combat inflation, the Fed raises the Fed Funds rate. To fight recession, it lowers the Fed Funds Rate.

But in today’s economy, there is evidence of both inflation and recession meaning that the Federal Reserve is likely to leave the Fed Funds Rate unchanged for fear of setting the economy too far towards either threat.

Therefore, markets will be left looking for clues in the carefully-worded press release signed by Federal Reserve Chairman Ben Bernanke and the other voting members of the FOMC.

If the Fed admits added vigilance against inflation, it’s expected that mortgage rates will fall because inflation causes rates to rise. By contrast, if the Fed harps on the downside risks in the economy, it’s expected that mortgage rates will increase.

Either way, today’s press release should be a market-mover.

If you’re currently floating your mortgage rate or are deciding between different lenders, be aware that mortgage rates will enter a period of extreme volatility this afternoon.

It may be prudent to complete your rate shopping before 2:00 P.M. ET.

Related Articles:

Mark Taylor | Arizona Home Loans | Blarming | Will You Listen to Me | Arizona Short Sales | Arizona Foreclosures | Arizona FHA Loans | Arizona USDA Loans | Arizona HUD Homes | Ariona VA Loans | Fix My Broken Credit | Arizona Mortgage | Arizona Short Sale | Power Ranch Bank Owned Homes

Your Reply

You must be logged in to post a comment.