The Fed Is Adjourning Today And How It Impacts Your Mortgage
The Federal Open Market Committee adjourns from a two-day meeting today and so this is a good time to remind yourself: The Fed does not control mortgage rates.
Rather, the Fed sets the Federal Funds Rate.
And the FFR is, in turn, used to determine Prime Rate.
Prime Rate, in turn, is used to determine the rates for credit cards, charge cards and home equity lines of credit.
And this is why today’s meeting should be important to holders of debt — the Fed’s decision to lower, raise or hold the FFR at its current level can impact the spending of every American household.
The Fed is widely expected to hold the Fed Funds Rate steady today, but Ben Bernanke & Co will issue a press release discussing the group’s view on the economy and the outlooks for the future.
As it relates to mortgages, the Fed’s actual actions today mean nothing. Instead, it’s all about the words. What will the FOMC say about inflation, the economy, and the outlook for the future?
This is what impacts the mortgage markets more than anything else.
If the Fed shows fear of inflation, mortgage rates will go up. If the Fed is satisfied that the economy is exhibiting controlled growth, mortgage rates will come down, by contrast.
Right now, markets are anticipating a bullish view on inflation from the Fed and that is one of the reasons why mortgage rates increased so dramatically since March. It will be looking for further clues at 2:15 P.M. ET today.
