The Federal Open Market Committee met this week and the main news was that they left interest rates unchanged. No one really expected the Fed to change interest rates.
Their statement released after the meeting said that the economic recovery is moving along at a moderate pace and employment is improving gradually. The housing sector remains depressed. The Federal Reserve is mandated to manage inflation levels and also to foster employment. The statement recognized that there have been inflationary pressures on the economy but that they were due to oil and food prices and were "transitory". They did recognize that unemployment remains "elevated".
The Fed stated that they plan to keep the Federal Funds rate near zero for an extended period of time and they also plan to keep their $600 billion bond market support package intact. Today's statement made several wonder if they are planning a third support package. If so, it could start immediately following the end of the current support package which ends June 30, 2011.
The concern over a third support package is that interest rates could move higher. When the second support package started at the end of November 2010, mortgage interest rates increased. Based on history repeating itself, if there is another support package, we could see interest rates increase again.
So far the market's reaction to this week's announcement has been slightly positive. However, we know that interest rates will rise, it's just a matter of when and how much. If you are looking at a new home or even refinancing, now may be the time to lock in your interest rate. I don't think many of us expect rates to get any lower, but we do know that they will increase at some point!!
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
