Sticking to Their Guns
This afternoon, the Federal Open Market Committee (a.k.a. “The Fed”) voted 9-to-1 to leave the Fed Funds Rate unchanged, in its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to strengthen” and that the jobs markets “is stabilizing”. It also said that business spending has “has risen significantly”.
A closer look into the past would see that this is a slight change from the Fed’s January statement in which housing was not mentioned and business spending was said to be “picking up”.
It’s also the sixth straight statement from the FOMC in which the Fed described the economy with optimism. This is a signal to markets that 2008-2009 recession is over and that economic growth is returning. Is anyone else wiping the sweat off their brow? I am.
The economy is not without threats, though, and the Fed identified several:
- High unemployment continues to threaten consumer spending
- Housing starts are at a “depressed level”
- Consumer credit remains tight
The message’s overall tone, however, remained positive and inflation is within tolerance limits.
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to end its $1.25 trillion commitment to the mortgage market by March 31, 2010. Fed insiders estimate that the bond-buying program lowered mortgage rates by 1 percent since its start.
Mortgage market reaction to the Fed press release is, in general, ambivalent. Mortgage rates in Urbandale are unchanged this afternoon.
The FOMC’s next scheduled meeting is April 27-28, 2010.
