Fed Meeting | FOMC | Federal Open Market Committee Meeting

The FOMC is a 12 member committee that meets 8 times a year to decide short term monetary policy.  The Federal Funds Rate, the rate banks charge other banks for short term [usually overnight] money, sets the stage for all rates.  Lower rates result in more liquidity and should stimulate the economy.  Higher rates should slow the economy.  When inflation feared the Fed usually tightens their policy by raising interest rates.  The Federal Funds Rate does not directly correlate with the long term fixed rates.  Long term fixed rates enemy is inflation, stimulating the economy can increase inflation risk.  On the other hand, lowering the Fed Funds Rate is a sign that the economy is weak.  A weak economy is good for mortgage rates.  The FOMC Meeting has an ELEVATED impact on mortgage rates.

When is the next Fed meeting?

The next Federal Open Market Committee [FOMC] meeting is Tuesday March 18, 2008.  The futures market is expecting the feds cut rate to be 2.25% after the -.75bp cut rate expected on Tuesday.  The FOMC meetings have an ELEVATED impact on mortgage bonds and mortgage rates.  The lower federal funds rate stimulates the economy, which can cause inflation the arch enemy of Mortgage Bonds.

Mortgage Update | 2.10.2008 | 30 Fixed 6.375% 15 Fixed 5.750%

 

We are set for another wild week for Fannie Mae Mortgage Backed Securities.  Today the mortgage bond market has moved 66bp again today.  30 Year Fixed interest rates lowered .125% at open, then rose about .25% by mid morning, and now sit almost equal to Friday.  The economic reports due this week are Balance of Trade [3.11], Crude Inventories [3.12], Retail Sales [3.13], Initial Jobless Claims [3.13], Consumer Price Index [3.14], and Consumer Sentiment [3.14].  Read more