FOMC leaves the Fed Funds Rate Unchanged

I'm just reading through the Fed's press release which announces that they are leaving the Fed Funds rate unchanged at 0-0.25%.  Good news for those of you with variable rates on your home equity loans–your rate is not going up…yet.

From today's FOMC Statement:

Conditions in financial markets were roughly unchanged, on balance, over the intermeeting period. Activity in the housing sector has increased over recent months. Household spending appears to be expanding but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.

The Fed's statement is fairly positive and good news for the economy means that investors will trade the safety of bonds (such as mortgage backed securities) for stocks; causing mortgage rates to trend higher.  In addition, the Fed reiterated they will be phasing keeping mortgage rates at artificial low rates by March 2010.

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. The amount of agency debt purchases, while somewhat less than the previously announced maximum of $200 billion, is consistent with the recent path of purchases and reflects the limited availability of agency debt. In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010.

The next big market mover that tends to dramatically impact mortgage rates is the Jobs Report.  Watch for it this Friday morning.

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