What’s Ahead For Mortgage Rates This Week – September 8, 2015

Whats Ahead For Mortgage Rates This Week September 8 2015Last week’s economic news included reports on construction spending, private and public sector employment data and a report from the Fed indicating that any move to raise interest rates may be delayed. The details:

Construction Spending Meets Expectations, Beige Book Indicates Wage Pressures

Analysts said that construction is gaining strength and could soon be the strongest sector of the economy. Construction spending for July met growth expectations of 0.70 percent as compared to June’s reading of 0.10 percent. The Commerce Department reported that this reading translated to a seasonally adjusted annual rate of $1.98 trillion, which was the highest rate of spending in the construction sector since May 2008.

Residential construction spending was up 10.80 percent year-over-year in July, with both single-family and multifamily construction posting double digit gains.

The Federal Reserve issued its Beige Book report last Wednesday, which indicated that wage pressures in many of the 13 Fed districts could cause rising inflation, which the Fed has cited as a component in any decision to raise the federal funds rate. The Fed has set a benchmark of 2.0 percent inflation as an indication for raising rates, but doesn’t expect to see this reading in the short term.

Higher wages increase consumers’ discretionary spending, which would contribute to more hiring and increasing demand for goods and services.

Mortgage Rates, Weekly Jobless Claims Higher

Freddie Mac reported that average mortgage rates rose across the board last week. The rate for a 30-year fixed rate mortgage rose by five basis points to 3.89 percent; the rate for a 15-year fixed rate mortgage wash higher by three basis points and the rate for a 5/1 adjustable rate mortgage also rose by three basis points to 2.93 percent. Average discount points were unchanged at 0.60 for fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

Weekly jobless claims rose to 282,000 new claims against last week’s reading of 270,000 new claims and expectations of 275,000 new jobless claims. While this was the highest reading for new jobless claims in since late June, the reading for new weekly jobless claims has remained below the 300,000 benchmark for the last six months.

The four-week rolling average of new jobless claims rose by 3250 new claims to an average of 275,500 new claims. Analysts said that layoffs are declining and that workers who lose their jobs are finding new employment quickly.

Continuing jobless claims fell by 9000 to a reading of 2.26 million for the week that ended August 22.

ADP Employment Rises, Non-Farm Payrolls, National Unemployment Rate Fall

Private sector payrolls increased by 190,000 jobs in August as compared to July’s reading of 170,000 jobs according to ADP. This supports the trend of stronger hiring seen by economists in recent weeks. The government reported that Non-farm payrolls, which include public and private sector jobs, fell to 173,000 jobs against July’s reading of 245,000 jobs.

The Commerce Department reported that the national unemployment rate dipped to 5.10 percent in August against expected reading of 5.20 percent and July’s reading of 5.30 percent. The declining unemployment rate further supports economic growth and stronger labor markets.

What’s Ahead

This week’s economic reports include job openings, the usual weekly reports on new jobless claims and mortgage rates and a report on consumer sentiment.

FOMC Minutes: Rate Hike May be Near

FOMC Minutes Rate Hike May be NearThe minutes for the most recent meeting of the Federal Reserve’s Federal Open Market Committee (FOMC) suggest that while committee members won’t specify a date, a rate hike could come sooner than later. Committee members continue to cite concerns over labor markets and other economic factors, but the minutes of the FOMC meeting held July 28 and 29 indicate that a majority of members see a rate change as likely in the near term.

Economic Conditions “Approaching” Readiness for Rate Hike

According to the minutes released Wednesday, the time for raising rates is not hear yet, but a majority of FOMC members feel that the time is approaching when economic conditions will warrant an increase of the target federal funds rate which is currently set at 0.00 to 0.25 percent. When the Fed increases this rate, consumer loan rates including mortgage rates are expected to increase as well.

Achieving maximum employment is one of the Fed’s mandates; labor markets continue to improve as the national unemployment achieved its lowest reading for 2015 as of June, but labor force participation and the unemployment to population ratio have also declined. On a positive note, the number of part-time workers was lower and under-utilization of workers was lower than since the beginning of the year.

Committee members continued to have varied opinions about whether employment rates are low enough to indicate that the Fed’s mandate of “maximum” employment had been achieved.

Inflation remains below the 2.00 percent medium-term goal set by the Fed. FOMC members have consistently indicated that they don’t expect to see inflation achieve the target rate in the near term.

Housing Markets Show Improvement

The minutes noted that while construction of new homes declined in June, new starts increased over the second quarter. Sales of new homes were lower in June, but sales of existing homes increased. Building permits issued suggest the rate of construction is stable but little changed. Pending home sales were stable and suggest little change in completed home sales in the near term.

A jump in multifamily building permits were attributed to an expiring tax credit date, but housing analysts have repeatedly cited the millennial generation as preferring to live and work in large metro areas where housing can be out of reach for all but the top tier of earners. In other economic sectors, the minutes said that auto loans and student loans continued to grow.

The FOMC minutes indicate the same position of FOMC members in recent months; while the national unemployment rate is low, the Fed does not expect to see inflation at the agency’s target rate of 2.00 percent immediately. Committee members note that they will continue to monitor domestic and global financial conditions as part of the fact-finding process necessary for deciding when to the federal target funds rate,

Speculation over when the Fed will move to raise rates has persisted for several months and will no doubt continue until the Fed does decide to raise rates.

What’s Ahead For Mortgage Rates This Week – August 10, 2015

Whats Ahead For Mortgage Rates This Week August 10 2015This week’s scheduled economic news includes reports on construction spending, a survey of senior loan officers, and reports on labor markets including ADP private sector jobs, the federal government’s reports on non-farm payrolls, core inflation and the national unemployment rate.

Construction Spending Slows, Loan Officers Survey Suggests Growing Confidence

Construction spending fell in June after the May reading was revised upward to 1.89 percent from the original reading of 0.90 percent. Spending for residential construction rose by 0.40 percent, while non-residential construction spending remained flat. The seasonally-adjusted annual outlay for construction was $1.06 billion in June.

Analysts continue to note a trend toward construction of smaller residential units including condominiums and apartments, with an emphasis on rental properties. This supports reports that would-be homebuyers are taking a wait-and-see stance to see how factors including rising home prices, fluctuating mortgage rates and labor market conditions perform.

According to a survey of senior loan officers conducted by the Federal Reserve, mortgage lenders reported that mortgage applications increased during the second quarter and indicating that financial constraints on consumers may be easing. According to the survey of 71 domestic banks and 23 foreign-owned banks, 44 percent of respondents reported moderate increases in loan applications, while only 5 percent of survey participants reported fewer loan applications.

Some banks surveyed reported easing mortgage approval standards, but fewer lenders eased standards than in the first quarter. Further supporting growing confidence among lenders, the Fed survey also reported that large banks were easing consumer credit standards for auto loans and credit cards.

Mortgage Rates Fall, Jobless Claims Rise

Freddie Mac reported that average mortgage rates fell across the board last week with the average rate for a 30-year fixed rate mortgage lower by seven basis points to 3.91 percent; the average rate for a 15-year fixed rate mortgage fell by four basis points to 3.13 percent, and the average rate for a 5/1 adjustable rate mortgage was unchanged at 2.95 percent. Discount points for all loan types were unchanged at 0.60 percent for 30 and 15-year fixed rate mortgages and 0.40 percent for 5/1 adjustable rate mortgages.

Weekly jobless claims rose from the prior week’s reading of 268,000 new claims to 270,000 new claims, which matched analysts’ expectations. In other labor-related news, the government reported a national unemployment rate of 5.30 percent in July; this was unchanged from June’s reading.

The ADP employment report for July showed fewer jobs were available in the private sector. June’s reading showed that private sector jobs grew by 229,000 jobs; July’s reading fell to 185,000 private sector jobs. According to July’s Non-farm Payrolls report, 215,000 new jobs were added in July as compared to expectations of 220,000 jobs added and June’s reading of 231,000 new jobs added.

The Federal Reserve’s Federal Open Market Committee (FOMC) is closely monitoring job growth and inflation rates as it contemplates raising the target federal funds rate. Core inflation grew by 0.10 percent in June; which was consistent with May’s reading and expectations. The FOMC recently cited the committee’s concerns about labor markets and lagging inflation. The Fed has set an annual growth rate of 1.65 percent for inflation for the medium term; this benchmark is part of what the Fed will consider in any decision to raise rates.

What’s Ahead

This week’s scheduled economic reports include reports on retail sales and consumer sentiment in addition to usual weekly reports on mortgage rates and new jobless claims.

 

 

Federal Reserve FOMC Announcement

Federal Reserve FOMC AnnouncementThe stage was set in high suspense for FOMC’s post-meeting announcement on Wednesday. As fall approaches, analysts and the media are looking for any sign of when and how much the Fed will raise its target federal funds rate. According to CNBC, some analysts were projecting two interest rate hikes before year end, but the truth of the matter remains unknown until the Federal Open Market Committee announces its intentions.

Meanwhile, reports of what Fed rate hikes will mean for consumers were released prior to the FOMC statement. Real estate analyst Mark Hanson said that a rate hike would “crush” housing markets, which continue to improve slowly in spite of the current 0.00 to 0.25 percent federal funds rate.

Last Friday’s report on June sales of new homes shows unpredictable progress in housing. Analysts estimated that new home sales would reach 550,000 units based on May’s reading of 517,000 new homes sold. June’s reading came in at 482,000 units sold.

FOMC Statement: Current Federal Funds Rate “Remains Appropriate”

The Federal Open Market Committee of the Federal Reserved announced as part of its post-meeting statement that it would not immediately increase the federal funds rate. The FOMC statement cited concerns over the inflation rate, which remains below the Fed’s goal of 2.00 percent. According to the statement, the FOMC will not move to raise the federal funds rate until the committee is “reasonably confident” that inflation will achieve the committee’s goal of 2.00 percent over the medium term.

No prospective dates for raising the target federal funds rate were given. The FOMC statement repeated language included in previous statements indicating that committee members anticipate that economic events could further postpone increases in the federal funds rate. The FOMC statement asserted that committee members continue to monitor domestic and global financial and economic developments as part of the decision-making process for raising the target federal funds rate.

FOMC members agreed that policy accommodation may be required “for some time” after the committee’s dual mandate of maximum employment and 2.00 percent inflation have been achieved. This suggests that FOMC members are not in a hurry to boost rates when economic uncertainty remains.

In terms of housing markets, the Fed’s decision not to raise rates likely caused a sigh of relief as rate increase would have caused consumer interest rates including mortgage rates to rise.

What’s Ahead For Mortgage Rates This Week – July 13, 2015

Whats Ahead For Mortgage Rates This Week July 13 2015Last week’s scheduled economic events were few due to the Independence Day holiday. Freddie Mac’s weekly survey of mortgage rates brought good news as mortgage rates fell across the board. The Federal Reserve released the minutes of its most recent Federal Open Market Committee (FOMC) meeting and weekly jobless claims rose.

Job Openings Rise to Highest Level Since 2000

The Labor Department reported that U.S. job openings rose from April’s reading of 5.33 million to 5.36 million job openings in May. This was the highest reading for job openings since the report’s inception in 2000. Private sector job openings rose to 4.85 million, an increase of 16 percent. Government jobs rose increased by 511,000 open jobs from April’s reading of 430,000 job openings. Based on the Labor Department’s report of 8.67 million unemployed workers, there were 1.60 job seekers for each job opening in May as compared to 2.10 job seekers for each job available in May 2014. There were approximately 1.80 job seekers for each job available when the recession started in December 2007.

FOMC Minutes: Fed Issues No Firm Date for Raising Rates

On Wednesday, the Federal Reserve released the minutes of June’s FOMC meeting, during which nine of ten committee members indicated that they were not ready to raise the federal funds rate. One FOMC member indicated that they were willing to wait for another meeting or two to raise rates. While FOMC has hinted at the likelihood of raising rates this fall, committee members are wary of moving too quickly and cited developments in China and Greece as concerns that contributed to the committee’s current wait and see position. When the Fed does raise its target rates from 0.00 percent, consumers can expect higher mortgage and loan rates.

Freddie Mac: Mortgage Rates Fall, Jobless Claims Rise

Mortgage rates fizzled last week with Freddie Mac reporting average rates lower for all types of mortgages. The average rate for a 30-year fixed rate mortgage was four basis points lower at 4.04 percent and discount points unchanged at 0.60 percent; the average rate for a 15-year fixed rate mortgage was also four basis points lower at 3.20 percent. Average discount points for a 15-year mortgage fell from 0.60 to 0.50 percent. The average rate for a 5/1 adjustable rate mortgage fell by six basis points to 2.93 percent with discount points unchanged at 0.40 percent.

According to the Labor Department, weekly jobless claims rose to 297,000 new claims filed as compared to 282,000 new claims filed the previous week. There were no estimates for last week’s jobless claims due to the holiday.

What’s Ahead

This week’s scheduled economic reports include Retail Prices, Retail Prices Except Automotive and the NAHB Housing Market Index. The Commerce Department is set to release monthly readings for Housing Starts and Building Permits. In addition to Freddie Mac’s report on mortgage rates and the Labor Department’s report on new jobless claims, the University of Michigan will wrap up the week with its Consumer Sentiment report.

Federal Reserve: No Change on Target Fed Funds Rate

Federal Reserve: No Change on Target Fed Funds RateThe Federal Open Market Committee (FOMC) of the Federal Reserve did not move to increase the Fed’s target federal funds rate, which is currently 0.00 to 0.250 percent. Although the committee acknowledged further progress toward achieving the Federal Reserve’s dual goal of maximum employment and an inflation rate of two percent, committee members indicated that they want to see further improvements in both areas before raising the federal funds rate.

In its customary post meeting statement, the FOMC said that it may not raise rates when both goals have been achieved. This statement may have been meant to calm ongoing speculation that the Fed will soon raise rates. The statement also said that FOMC members may “elect to keep the target federal funds rate below levels the committee considers normal in the longer term.” This stance suggests that the Fed wants to be very sure that economic improvement is on a solid track before it raises rates.

The statement further indicated that the FOMC is not completely influenced by the Fed’s goals of maximum employment and two percent inflation; instead, the committee said that it will consider ongoing domestic and global news and economic reports along with readings on financial and economic developments as part of its decision to raise or not raise the target federal funds rate.

Analyst reactions to the decision not to raise rates suggests that the Fed is likely to raise rates at its September meeting and possibly again in December.

Fed Chair Janet Yellen’s Press Conference

Fed Chair Janet Yellen gave a scheduled press conference after the FOMC statement was issued and answered questions on a variety of topics. Ms. Yellen noted that retiring baby boomers are expected to take up slack in employment lags; as boomers retire, they drop out of the work force and reduce the number of people actively seeking employment.

Ms. Yellen also noted that when the Fed does raise rates, seniors and retirees could benefit from higher yields on savings.

In response to questions about when the Fed will raise its target federal funds rate, the Fed Chair said that the Fed has not decided when to raise rates and said that unfolding economic developments would play a role when the Fed does decide to raise rates.

Ms. Yellen encouraged emphasis on when the Fed will make its first rate hike. She recommended focusing on “the entire trajectory” of rate increases, which some analysts took to mean don’t panic about the first rate increase.

What’s Ahead For Mortgage Rates This Week – May 18, 2015

Whats Ahead For Mortgage Rates This Week May 18 2015Last week’s economic reports included data from the Federal Reserve on student loan debt, job openings and retail sales. Weekly jobless claims and Freddie Mac’s survey of average mortgage rates were released as usual on Thursday. A report on consumer sentiment wrapped up the week’s scheduled economic new.

Federal Reserve: Student Loan Borrowers Struggle with Payments 

In two reports issued by the New York and St. Louis branches of the Federal Reserve, researchers found that high numbers of student loan borrowers are behind in making payments. According to the New York Fed, 11.10 percent of student loan borrowers were 90 or more days past due on their payments during the first quarter of 2015.

This is a slight improvement over the fourth quarter of 2014, when 11.30 percent of student loan borrowers were 90 or more days behind with their payments. The Fed notes that these percentages do not include borrowers who are behind on payments but who are not required to make payments due to forbearance or other approved payment deferrals. 

The burden of student loan debt is a serious consideration for the housing sector, as student loan debt can keep would-be buyers from qualifying for mortgages needed to buy homes. Worse, delinquency on student loans can damage borrowers’ credit and create further obstacles to getting a mortgage.

Job Openings, Retail Sales Lower

The Labor Department reported that job openings fell to 4.99 million in March as compared to February’s reading of 5.14 million job openings. March job openings increased by 19 percent year-over-year. There were about 1.72 job seekers for each job opening in March, which is lower than the reading of 1.77 job seekers per job when the recession started in December 2007.

Retail sales were unchanged in April against an expected increase of 0.10 percent and the March reading of 1.10 percent. Retail sales without the automotive sector expanded by 0.10 percent against expectations of 0.40 percent growth and March growth of 0.70 percent. Increasing fuel prices and skepticism over economic conditions likely contributed to slack retail sales.

Mortgage Rates Mixed, Jobless Claims Lower

Weekly jobless claims provided some good news as they came in at 264,000 new claims against expectations of 275,000 new claims and the prior week’s reading of 265,000 new jobless claims. This was the third consecutive week that new jobless claims were less than 270,000; this has not occurred since 1975.

Freddie Mac reported that average rates for fixed rate mortgages rose, while the average rate for a 5/1 adjustable rate mortgage ticked downward by one basis point. The average rate for a 30-year fixed rate mortgage rose by five basis points to 3.85 percent. The average rate for a 15-year fixed rate mortgage also increased by five basis points to 3.07 percent. Discount points averaged 0.60 percent for fixed rate mortgages and 0.50 percent for 5/1 adjustable rate mortgages.

Consumer sentiment as reported by the University of Michigan dropped to a seven month low of 88.6 as compared to April’s reading of 95.9 and an expected reading of 94.9. Consumers are concerned about the economy and their personal finances. The reading for consumer sentiment prior to the recession averaged 86.9 over the year prior to the recession. Economists cited weak wage growth and rising fuel prices as contributing causes of consumer uncertainty.

What’s Ahead

This week’s scheduled economic news includes a number of housing-related reports. The NAHB Home Builders Housing Market Index, The National Association of Realtors® Existing Home Sales report, Housing Starts and Building Permits and the minutes of the Fed’s last FOMC meeting are set for release. Freddie Mac mortgage rates and Weekly Jobless Claims will be released as usual on Thursday.

 

 

Federal Open Market Committee, Fed Chair: No Rush to Raise Rates

Federal Open Market Committee Fed Chair No Rush to Raise Rates Wednesday’s customary post-meeting statement issued by the Federal Open Market Committee (FOMC) of the Federal Reserve provided some relief to investors and analysts concerned that the Fed may soon raise its target federal funds rate. The target federal funds rate has held steady at between 0.00 and 0.25 percent since the inception of the Fed’s current quantitative easing program. The FOMC statement indicated that the committee does not expect to raise the target federal funds rate until the Fed’s dual mandate of maximum employment and reaching its target inflation rate is achieved.

FOMC members don’t expect the wind-down of scheduled securities purchases under the quantitative easing program to cause long-term interest rates to rise quickly. The FOMC statement indicates that the Fed expects its current holdings and acquisitions of securities to hold down long-term interest rates and help with achieving the Fed’s dual mandate of achieving maximum employment and 2.00 percent inflation. As in past meetings, the FOMC statement asserted the committee’s dedication to reading and researching economic and financial reports and repeated that Fed policy is not contingent on a predetermined course, but that FOMC members make decisions based on current economic trends and developing domestic and global events.

FOMC members also re-asserted their position that after employment and inflation achieve levels consistent with the Fed’s dual mandate, the Fed will likely maintain the target federal funds rate at lower levels than the committee considers normal for “some time.”

Fed Chair Janet Yellen provided further insight into Fed policy during a press conference given after the FOMC statement. She also said that the FOMC’s view of current economic conditions has not changed over the past few months. Chair Yellen also said that the committee expects to maintain the current target federal funds rate for a “considerable time” after asset purchases under the QE 3 program cease.

Fed Chair Yellen: Gaps Between Current Data and Fed’s Mandate Shrink Modestly

In a press conference given after the FOMC policy statement was released, Fed Chair Janet Yellen emphasized that the committee’s discussions did not imply any near-term changes to the target federal funds rate. Chair Yellen cited gaps between current unemployment rates and the Fed’s mandate of achieving maximum employment and the current inflation rate and the Fed’s target inflation rate of 2.00 percent as major considerations in forming current Fed policy. She said that the respective gaps had narrowed “modestly,” and again emphasized the Fed’s commitment to constant review of economic and financial data as a significant factor in its decisions to change monetary policy.

Ms. Yellen cautioned media representatives and analysts to avoid making economic projections too far into the future and pointed out that longer term predictions are subject to more variables. Chair Yellen also cautioned press conference attendees not to consider anything in the FOMC statement or her press conference to a definite time frame.

Media reps continued to press for definite dates and time projections, but Chair Yellen held fast to the Fed’s often-repeated position that policy changes cannot be set by a calendar and also depend on economic trends and news that influence the Fed’s monetary policies.

What’s Ahead For Mortgage Rates This Week – Aug 11, 2014

Whats Ahead For Mortgage Rates This Week Aug 11 2014

Last week’s housing related news was minimal, but a Federal Reserve survey of senior loan officers revealed that although credit standards for commercial and industrial loans as well as credit cards are easing, current mortgage credit standards are more stringent than in 2005. This could be a contributing factor to slowing housing market gains while other sectors of the economy are recovering at a faster pace.

Qualified Mortgage Rules Impact Non-Conforming Mortgages

The Senior Loan Officers survey also noted that qualified mortgage rules have slowed approval of prime jumbo mortgages and non-traditional home loans. This suggests that applicants falling outside of stringent qualified mortgage rules can expect challenges when buying or refinancing their homes.

In other housing news, Freddie Mac’s Primary Mortgage Market Survey reported that last week’s mortgage rates were mixed. Mortgage rates for a 30-year fixed rate mortgage averaged 4.14 percent with discount points of 0.70 percent against last week’s reading of 4.12 percent with discount points of 0.60 percent. 15-year mortgage rates averaged 3.27 percent with discount points of 0.60 percent. This was an increase of four basis points, although discount points fell from 0.70 percent to 0.60 percent. The average rate for a 5/1 adjustable rate mortgage was 2.98 percent, a drop of two basis points, with discount points unchanged at 0.50 percent.

Fewer Jobless Claims, Service-Related Business Growth Exceeds Expectations 

The weekly Jobless Claims report brought a lower than expected reading of 289,000 new claims as compared to predictions of 305,000 new jobless claims. In other economic news, the Institute for Service Management (ISM) reported that its non-manufacturing index rose from June’s reading of 56.00 percent to 58.70 percent in July. Analysts had forecasted July’s reading at 56.50 percent. July’s reading represented the highest growth rate for service-related businesses since 2005.

According to the Department of Commerce, June factory orders rose by 1.10 percent over May’s reading of -0.60 percent against an expected reading of 0.60 percent. As business expands and factory orders increase, it’s likely that jobs and hiring will also grow. Steady employment is a compelling factor for most home buyers and positive reports in labor and industrial sectors could boost housing markets as more buyers increase demand for homes.

What’s Ahead

Next week’s economic reports include retail sales, retail sales excluding automotive, industrial production and the weekly reports on mortgage rates and new jobless claims. While there isn’t much housing news expected next week, readings in other economic sectors can suggest potential trends in housing markets

FOMC Minutes: Committee Discusses “Normalizing” Policy

FOMC Minutes: Committee Discusses “Normalizing” PolicyApril’s meeting of the Fed’s Federal Open Market Committee was held along with the Board of Governors of the Federal Reserve System.

Meeting minutes released Wednesday indicated the committee’s interest in “normalizing” its monetary policy. This included the FOMC’s ongoing commitment to tapering its asset purchases under its quantitative easing program.

The committee agreed to taper the Fed’s monthly asset purchases by $10 billion to $45 billion per month. Committee members discussed raising the target federal funds rate, which now stands at 0.00 to 0.25 percent, but the minutes clearly stated that this topic was undertaken as part of “prudent planning, and did not indicate that normalization would necessarily begin sometime soon.”

The FOMC minutes reflected the committee’s concern with achieving a balance between normalizing the Fed’s monetary policy and keeping short-term interest rates under control.

Meeting attendees considered methods for managing interest rates and considered potential impact of each method discussed on overall financial stability.

Importance Of Early Communication

Meeting participants discussed the importance of early communication of pending changes to the Fed’s monetary policy, and agreed that advising the public “well before the first steps in normalizing policy become appropriate.”

Early communication to the public of planned changes was viewed as a means of providing clarity and credibility to FOMC policy decisions and help FOMC achieve its statutory goals of maximum employment, stable pricing and moderate long term interest rates.

Potential Impact Of Achieving Normalcy

 FOMC members discussed the possible impact of tools considered for use in normalizing the economy on the following:

  • Fed control over short-term interest rates
  • The Fed’s balance sheet and Treasury remittances
  • Functionality of Federal Funds Market
  • Financial stability in normal times and times of stress

The minutes noted that the Fed has never used any of the methods discussed while the Fed held a large balance sheet, and recommended that flexibility in using tools for achieving normal fiscal policy.

No decision was made about normalizing current monetary policy; FOMC and Fed Board members agreed that further study and analysis were needed before any decisions would be made.

Fed: Mortgage And Refinance Applications “Tepid”

The FOMC minutes characterized the level of mortgage and refinance applications through March as tepid, due to increasing mortgage rates and home prices.

While a survey of senior loan officers revealed that mortgage credit had been loosened for applicants with prime credit, mortgage credit remained tight for those with less than excellent credit.

The unemployment rate held steady at 6.70 percent and remained above the FOMC’s benchmark of 6.50 percent. There was some good news as the workforce expanded and the ranks of the long-term unemployed decreased.

Stable employment is important to potential home buyers; if unemployment levels continue to fall, numbers of home buyers are likely to increase.