Mortgages For America

Home Mortgages & Financing Stateline Nevada / South Lake Tahoe California

  • Main Website
  • Blog
  • Reviews
    • Zillow Reviews
    • All Reviews
    • Leave a Review
  • Manufactured / Mobile Home Loans
  • Contact

The Federal Open Market Committee Holds Steady With Mortgage Backed Security Investments

June 21, 2013 by Ken Burrows Leave a Comment

The Federal Open Market Committee Holds Steady With Mortgage Backed Security InvestmentsThe Federal Open Market Committee (FOMC) of the Federal Reserve decided to continue its current policy of quantitative easing (QE) based on current economic conditions. The Fed currently purchases $40 billion in mortgage-backed securities (MBS) and $45 billion in Treasury securities monthly.

Objectives for the QE program include:

  • Keeping long term interest rates, including mortgage rates, low
  • Supporting mortgage markets
  • Easing broader financial conditions

FOMC repeated its position of evaluating QE policy based on inflation, the unemployment rate and economic developments.

Members of the FOMC determined that keeping the federal funds rate between 0.00 and 0.25 percent until the following conditions are met:

  • National unemployment rate reaches 6.50 percent
  • Inflation is expected not to exceed 2.50 percent within the next one to two years
  • Longer term inflation expectations are “well-anchored.”

Committee members agreed to consistently review labor market conditions, inflationary pressures and expected rates of inflation and other financial developments for determining their course of action on QE.

In its post-meeting statement, FOMC asserted that any changes to current QE policy would be taken in consideration of longer range goals for maximum employment and an inflation rate of 2.00 percent.

Fed Chairman Gives Press Conference

After the FOMC statement, Fed Chairman Ben Bernanke held a press conference which provided details about the future of QE and how the Fed will “normalize” its monetary policy. Chairman Bernanke noted that as QE is reduced and eventually stopped, the Fed will not be selling its MBS holdings.

This is important, as demand for MBS is connected to how mortgage rates perform. If the market is flooded with MBS, demand would slow, and prices would fall. When MBS prices fall, mortgage rates typically rise.

According to Chairman Bernanke, the FOMC does not see any immediate reason for changing its purchase of Treasury securities and MBS in the near term, but will continue to monitor conditions. Using the analogy of driving a car, the chairman indicated that the Fed’s intent regarding QE and the federal funds rate would be better compared to easing up on the accelerator rather than putting on the brakes.

Chairman Bernanke also characterized benchmarks cited in connection with increasing the federal funds rate as “thresholds, and not triggers.” This suggests that even if national unemployment and inflation reach Fed targets, that other economic conditions occurring at that time could cause the Fed to alter its plan for raising the federal funds rate.

The Fed chairman said that during Wednesday’s FOMC meeting, 14 of 19 participants did not expect changes to the federal funds rate until 2015, and one member didn’t expect a change until 2016.

Filed Under: Federal Reserve Tagged With: Federal Reserve,Interest Rates,Quantitative Easing

Leave a Reply

You must be logged in to post a comment.

Ken Burrows

Mortgages For America
298 Kingsbury Grade, Suite 2E
Stateline, NV 89449
Apply Now
Get a Free Rate Quote


Connect with Us

Subscribe To Our Blog!

Enter your email address:

Recent Articles

  • 3 Things That Will Absolutely Kill Your Chances for a Mortgage Approval
  • Mortgage Interest Rate Versus APR: What To Know
  • Navigating A Market With Higher Interest Rate
  • Understanding Mortgage Pre-Approvals and How to Avoid Being Declined for One
We've been helping customers afford the home of their dreams for many years and we love what we do.

NMLS: 993846
NMLS Consumer Access

Contact

Ken Burrows
Mortgages For America

298 Kingsbury Grade, Suite 2E
Stateline, NV 89449

Office: (888) 320-7888
Mobile: (775) 580-7115
Fax: (866) 328-4456

Copyright © 2023 · Powered by MySMARTblog