What is the FOMC?

The Federal Open Market Committee (FOMC) holds a one-day meeting today, it’s 8th scheduled meeting of the year and 10th overall.

The FOMC is part of the Federal Reserve, the government group that sets U.S. monetary policy. The Fed’s primary policy-setting tool is an interest rate known as the Fed Funds Rate.  The Fed Funds Rate is the interest rate at which banks borrow money from each other.  Important note: The Fed Funds Rate (FFR) should not be confused with mortgage rates.

Two years ago on Thursday, the FOMC met and voted to lower the Fed Funds Rate to as close to zero percent as possible without actually going to zero percent; the benchmark rate was prescribed to a range of 0.000-0.250 percent.  That was with the goal of stimulating the weak economy.

This Meeting Determines Weather Rates Rise or Fall

The Fed Funds Rate had never been set so low before, but ever since, it’s been held to that range. It will likely be held where it is through early-2011.  With that said, it doesn’t mean that mortgage rates won’t change.

Because the Fed Funds Rate has been so low for so long, businesses and consumers have been able to borrow money on the cheap. As a result, both capital and household spending have been on the rise, which is good news for the economy.

The Fed is expected to acknowledge this sentiment today.  In turn, this should lead mortgage rates higher.

The Fed’s press release is the focus for the markets.  If there’s talk of higher-than-expected inflation or better-than-expected growth you should see mortgage rates move higher.  If there’s talk of a slowdown should lead rates lower.

If you still haven’t locked in your interest rate and you need some help, I’d be happy to help.  Feel free to email me or call me at the information on this page!

Tagged as: FOMC, Mortgage Rates