A Simple Explanation Of The Federal Reserve Statement (December 13, 2011 Edition)

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 in Atlanta 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.

 

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