Sun State Savings

Wednes­day, the Fed­eral Reserve’s Fed­eral Open Mar­ket Com­mit­tee voted to leave the Fed Funds Rate unchanged within its cur­rent tar­get range of 0.000–0.250 percent.

The Fed Funds Rate has been near zero per­cent since Decem­ber 2008.

For the third con­sec­u­tive month, the Fed Funds Rate vote was nearly unan­i­mous. Just one FOMC mem­ber dis­sented in the 9–1 vote, object­ing only to the lan­guage used in the Fed’s offi­cial statement.

In its press release, the Fed­eral Reserve noted that the the U.S. econ­omy has “expand­ing mod­er­ately” since its last meet­ing in Decem­ber 2011, adding that the growth is occur­ring despite “slow­ing in global growth” — a ref­er­ence to ongo­ing eco­nomic uncer­tainty within the Eurozone.

The Fed­eral Reserve expects mod­er­ate eco­nomic expan­sion through the next few quar­ters but is wary of “strains” from global finan­cial mar­kets, and these three threats to the U.S. economy :  

1. The hous­ing sec­tor remains “depressed”
2. The unem­ploy­ment rate remains “elevated”
3. Fixed busi­ness invest­ment has “slowed”

On the pos­i­tive side, the FOMC said that house­hold spend­ing is ris­ing and infla­tion remains in-check. The group also believes that employ­ment will grad­u­ally improve nation­wide going forward.

The Fed­eral Reserve nei­ther intro­duced new eco­nomic stim­u­lus, nor dis­con­tin­ued exist­ing mar­ket programs.

Imme­di­ately fol­low­ing the FOMC’s state­ment, mort­gage mar­kets ral­lied, pres­sur­ing mort­gage rates to fall. 

Mort­gage rates remain near all-time lows and, for home­own­ers will­ing to pay points plus clos­ing costs, con­ven­tional, 30-year fixed rate mort­gages can be locked at below 4 per­cent. If you’re in the process of buy­ing or refi­nanc­ing a home , it’s a good time to lock a mort­gage rate with your lender.

The FOMC’s next sched­uled meet­ing is a one-day event slated for March 13, 2012.

The Fed­eral Reserve has released the min­utes from its most recent Fed­eral Open Mar­ket Com­mit­tee meet­ing. The Fed Min­utes are a detailed meet­ing recap; the com­pan­ion piece to the more brief, more well-known press release.

As a com­par­i­son, the min­utes of the last FOMC meet­ing con­tained 60 para­graphs and 7,027 words. The post-meeting press release was just 5 para­graphs and 382 words.

December’s Fed Min­utes shows Fed mem­bers with a pos­i­tive, cau­tious, take on the economy.

Recent data sug­gests that the U.S. econ­omy is expand­ing, the Fed said, but “strains” in global finan­cial mar­kets pose “sig­nif­i­cant risks” to the down­side. This tell us that the Fed believes its economy-stimulating pro­grams are work­ing, but that offi­cials remained con­cerned by events in the Eurozone.

The U.S. econ­omy could be impacted by fallout. 

Other meet­ing con­sen­sus included : 

• On growth : The econ­omy is expand­ing, despite slow­ing in “global eco­nomic growth”
• On hous­ing : Data sug­gests the “depressed” mar­ket “could be improving”
• On infla­tion : Prices are sta­ble, and remain within tol­er­ance levels

The Fed’s analy­sis was of lit­tle sur­prise to Wall Street, and going for­ward, Fed Chair­man Ben Bernanke wants to keep it that way. The Fed Min­utes con­tained a pas­sage regard­ing mar­ket com­mu­ni­ca­tion, and how the Fed will be more pro-active about it in the future. 

With the release of its min­utes, in a sec­tion called “Mar­ket Pol­icy Com­mu­ni­ca­tions”, the Fed­eral Reserve showed its plans to release 4 times annu­ally its eco­nomic fore­casts, and plans for the Fed Funds Rate. This sig­nals in a shift in Fed­eral Reserve transparency.

The Fed­eral Reserve will begin includ­ing the fore­cast in its eco­nomic pro­jec­tions begin­ning after its next pol­icy meet­ing, Jan­u­ary 24–25, 2012.

Mort­gage rates were lit­tle changed after the release of the Fed Minutes.

Tues­day, the Fed­eral Open Mar­ket Com­mit­tee voted to leave the Fed Funds Rate unchanged within its cur­rent tar­get range of 0.000–0.250 percent.

The vote was nearly unan­i­mous for the sec­ond straight month. Just one FOMC mem­ber dis­sented in the vote, favor­ing addi­tional pol­icy stim­u­lus beyond what the Fed­eral Reserve cur­rently provides.

In its press release, the Fed­eral Reserve sais that the the U.S. econ­omy is improv­ing, not­ing that since its Novem­ber 2011 meet­ing, the econ­omy has been “expand­ing mod­er­ately”. The Fed also added that domes­tic growth is occur­ring despite some “appar­ent slow­ing in global growth” — a nod to ongo­ing uncer­tainty within the Eurozone.

The Fed­eral Reserve expects a mod­er­ate pace of growth over the next few quar­ters, and believes that the jobs mar­ket will con­tinue to improve, but slowly.

Other poten­tial soft spots within the econ­omy include :  

1. A slow­down in busi­ness investment
2. A “depressed” hous­ing market
3. Strains in global finan­cial markets

The Fed­eral Reserve added no new poli­cies at its Decem­ber meet­ing, and made no changes to exist­ing ones. It re-iterated its plan to leave the Fed Funds Rate within its cur­rent range of 0.000–0.250 per­cent “at least until mid-2013″ and re-affirmed “Oper­a­tion Twist” — the stim­u­lus pro­gram through which the Fed sells Trea­sury secu­ri­ties with a matu­rity of 3 years or less, and uses the pro­ceeds to buy mort­gage bonds with matu­rity between 6 and 30 years.

Mort­gage bonds are mostly unchanged since the Fed’s announce­ment, giv­ing mort­gage rates lit­tle rea­son to rise or fall.

Mort­gage rates remain near all-time lows and, for home­own­ers will­ing to pay points + clos­ing costs, 30-year fixed rate mort­gages can be locked at less than 4 per­cent. If you’re think­ing of buy­ing or refi­nanc­ing a home, it’s a good time to lock a mort­gage rate.

The FOMC’s next meet­ing will be its first sched­uled meet­ing of the new year. The meet­ing is slated for Jan­u­ary 24–25, 2012.