THE FED LEAVES RATES UNCHANGED
Minneapolis, MN: Today the FED (Federal Open Market Committee) voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.
Mortgage bonds are mostly unchanged since the Fed’s announcement, giving mortgage rates in Minnesota and Wisconsinlittle reason to move significantly in any direction.
WHAT ARE MORTGAGE INTEREST RATES BASED ON? The primary answer is mortgage-backed bonds, better known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates. Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall.
In its press release, the Federal Reserve said that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”. The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty in Europe.
The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.
Other potential soft spots within the economy include :
- A slowdown in business investment
- A “depressed” housing market
- Strains in global financial markets
The Federal Reserve added no new policies at its December meeting, and made no changes to existing ones. It re-iterated its plan to leave the Fed Funds Rate within its current range of 0.000-0.250 percent “at least until mid-2013″ and re-affirmed “Operation Twist” — the stimulus program through which the Fed sells Treasury securities with a maturity of 3 years or less, and uses the proceeds to buy mortgage bonds with maturity between 6 and 30 years.