The Federal Reserve met this week and as expected they left interest rates unchanged. However the comments after the meeting and the changes to their balance sheet runoff were important.
The Fed’s statement showed they are more concerned about inflation than the labor market. The unemployment rate has stabilized at a low level the past few months and the labor market conditions remain solid from what the Fed feels. They have repeatedly talked about inflation and their concern that it is still too high.
What affected the bond market and helped interest rates a little bit was the change to their balance sheet. They have been letting $25 billion run off – or sell – from their balance sheets. They are going to drop that number to $5 billion. This means they will be purchasing at least $20 billion in Treasuries starting in April. The bond market liked that news.
As far as Fed rate cuts, they are still projecting two cuts this year. There are some investors that think the Fed will cut rates three or four times this year. We’ll see what happens as we get more economic news and more Fed meetings.
The bottom line to this meeting was that the bond market liked the news, mainly because they are slowing the runoff in April and will be buying more treasuries and that is good news for interest rates.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
