The Federal Open Market Committee adjourns from its 2-day meeting today–and San Diego home owners and buyers should pay attention.
The monetary policy-setting group is expected leave the Fed Funds Rate within its current target range of 0.00-0.250 percent.
This is the lowest range for the Fed Funds Rate in history and, frankly, there’s very little room left to go lower.
Therefore, markets aren’t really concerned about what happens to the benchmark lending rate today. Markets will instead focus on the Fed’s proposals to revive (if not save) the U.S. economy.
In its post-FOMC press release last month, the Federal Reserve pledged to “employ all available tools” to get the economy rolling in the right direction. Some of those tools were already in play, including making direct loans to large companies and buying bad debts from commercial bank balance sheets.
But since that meeting, the Fed has put its money where its press release is. Earlier this year, the Fed started a program to buy $500 billion in mortgage-backed debt and those ongoing purchases are part of what’s keeping mortgage rates relatively low. The Fed has since made it easier for member banks to borrow money, too.
Each of these steps is meant to pour much-needed fuel into the U.S. economic engine. The Fed is also pledging to keep trying new approaches–at least until something works. And this is what mortgage markets–and San Diego mortgage brokers– will be concerned with today.
If the Fed’s next stimulus plan is judged ineffective or too costly, mortgage markets will likely sell off, causing San DIego mortgage rates to rise and making housing payments even more expensive. The jump could be somewhat sudden because Fed announcements are often met with emotional, knee-jerk reactions.
By contrast, if the Fed’s next steps are seen as being on target, we can expect mortgage rates to fall only slightly. To some extent, this outcome is already priced into rates as of this morning.
The FOMC’s official press release hits at 2:15 PM ET.
(Image courtesy: The New York Times)