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Posts tagged FOMC,Fed Minutes,Inflation
Fed Minutes Put The Heat On Mortgage Rates To Rise
May 19th
The Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Illinois are higher by 1/8 percent this morning, at least.
The “Fed Minutes” is published 8 times annually, three week after each scheduled FOMC meeting. The minutes are the Federal Reserve’s official recap of the conversations and debates that shaped the prior FOMC session.
Another way to consider the Fed Minutes is as the companion piece to the more well-known FOMC press release. The press release is issued on the day of adjournment, and is brief, narrow, and high-level. The statement makes broad comments on the economy and outlines new monetary policy.
By contrast, the Fed Minutes is delayed, lengthy, and rife with details. The minutes highlights arguments and discussion points between Fed members, and digs deep into underlying economic issues.
The FOMC press release is measured in paragraphs. The Fed Minutes is measured in pages.
Here is some of what the Fed discussed last month:
- On inflation : Higher levels are “transitory”; will level-off with commodity prices
- On housing : The market remains depressed. “Vacant properties” are harming construction.
- On stimulus : The Fed will stick to its $600 billion support plan
In addition, at its meeting, the Federal Reserve discussed an exit strategy for its market support. The details are undecided, but the debate shows that the Fed is anticipated a change in policy sometime soon.
Wall Street estimates that a gradual economic tightening will begin within 12 months.
Mortgage rates have been fading since mid-April. The Fed Minutes may be the catalyst of a reversal. The Federal Reserve expects growth in the U.S. economy and growth tends to boost stock markets at the expense of bonds.
As bond markets fall, mortgage rates in Chicago rise.
Currently, Freddie Mac reports the average 30-year fixed mortgage rate as 4.63% — the lowest of the year.
Fed Minutes Help Push Mortgage Rates To 4-Month High
Nov 26th
The Federal Reserve released its November 2-3, 2010 meeting minutes Tuesday afternoon. Mortgage rates in Illinois have been on the move since.
The Fed Minutes is a comprehensive review of Federal Open Market Committee meetings; a detailed look at the debates and discussions that shape our country’s monetary policy. The report is published 3 weeks to-the-day after the FOMC adjourns.
Fed Minutes add depth to the briefer, more well-known “statement” to the markets which is issued upon adjournment. As a comparison:
- The November 3 statement contained 497 words
- The November 3 meeting minutes contained 6,623 words
If the Fed Statement is the executive summary, the Fed Minutes is the novel. And, the extra words matter.
When the Federal Reserve publishes its minutes, it gives clues about the groups next policy-making steps. For example, in November’s minutes, it’s revealed that the Fed discussed setting inflation targets for the economy; holding occasional policy briefings for the press; and, working to set yields on instruments such as the 10-year Treasury note.
In addition, the Federal Reserve acknowledged a video conference hosted October 15, the second such “unannounced” meeting of the year. The other was May 9, 2010.
Bond markets have not taken kindly to the Fed Minutes. The minutes show a propensity toward Fed “action”, most of which markets believe to be inflationary. Inflation leads to higher mortgage rates and that’s exactly what we’ve seen.
As compared to Tuesday morning, mortgage applicants in Chicago are finding conforming and FHA mortgage rates to be higher by as much as 0.375 percent. In “real life” terms, assuming a 30-year term, that’s an extra $264 in annual mortgage payments per $100,000 borrowed.
If you’re still rate shopping, consider getting locked today. As a result of the recent shift, mortgage rates are now at a 4-month high.
Fed Minutes Edge Mortgage Rates Higher
Oct 13th
The Federal Reserve released its September 21, 2010 meeting minutes Tuesday afternoon. Mortgage rates in Illinois are slightly higher today.
It’s unwelcome news for this season’s home buyers, and existing homeowners with plans to grab lower rates. Mortgage rates made new lows last week and may have reached a turn-around point.
The “Fed Minutes” is published 8 times annually, and is the official meeting recap for the Federal Open Market Committee. Similar to the meeting minutes released after a corporate conference or condo association gathering, the Fed Minutes details the conversation and debate between meeting attendees.
Minutes are the lengthy companion to the Fed’s brief, post-meeting press release.
Because of its content, the Fed Minutes is closely read by Wall Street and economists. It’s insight into the talk that shapes our nation’s monetary policy and, within the text, there’s often clues about the Fed’s next move.
Here’s some of what the Fed discussed last month:
- On inflation : It’s running at lower-than-optimal levels
- On housing : Post-tax credit, housing stalled in July
- On stimulus : The Fed may intervene in open markets within the next few months
The over-riding theme within the minutes was that the U.S. economy is growing a steady pace, albeit slower than what’s optimal. The Fed is prepared to push things along if the economy slows further and news like that is helping stock markets.
Bond markets are losing. Rates are rising.
For now, mortgage rates hover near all-time lows. If you haven’t locked a mortgage rate yet, your window may be closing. Once the economy turns around for certain, mortgage rates will be among the first of the casualties.