The Federal Reserve outlined a plan to begin tapering its emergency bond purchases. The purchases of $120 billion per month in Treasuries and mortgage-backed securities (MBS) were a government effort to keep financial markets afloat after the economic fall out from Covid-19. The Federal Open Market Committee (FOMC) met for two days this week then released a statement saying the Fed will begin tapering those purchases later this month. It will reduce its purchases of Treasury securities from $80 billion to $70 billion and from $40 billion to $35 billion for mortgage-backed securities. “In light of the substantial further progress the economy has made toward the Committee’s goals since last December, the Committee decided to begin reducing the monthly pace…
Two of the Biden administration’s top finance officials are warning that inflation is on the rise and is likely to linger, which could have an impact on the cost of both houses and the mortgages needed to buy them. During testimony before the Senate Banking Committee, Treasury Secretary Janet Yellen acknowledged that inflation is rising twice as fast as the 2% she had predicted. “Probably closer to 4% and that already almost must be the case based on what’s happened this year,” she told Sen. John Kennedy (R-La.) “Inflation is elevated and will likely remain so in coming months before moderating,” Fed Chairman Jerome Powell said in his opening statement. When asked if the inflation problem is more significant than…
Economists and housing industry experts are keeping a close eye on Washington D.C.’s debate over raising the debt ceiling and what it might mean for interest rates. Congressional Democrats are heading into what even Speaker Nancy Pelosi acknowledges is a turbulent week or two, in which her party will attempt to use its narrow majorities to pass two massive spending bills. At the same time, Washington’s about to hit the limit of debt it can issue to keep paying its bills. Treasury Secretary Janet Yellen says the nation will run up against the debt ceiling sometime in October. Democrats are demanding the GOP follow the tradition of previous debt-ceiling votes and support an increase. Republicans, angry over the Democrats’ decision…
The Federal Open Market Committee (FOMC) is meeting September 21 and 22 to discuss the next steps on broad issues related to monetary policy. But in the mortgage industry, there’s only one question on brokers’ minds: What’s going to happen to interest rates? As of today, the best guess is: Not much. Fed-watching is an industry unto itself, and the phrase that’s caught their attention is “substantial further progress.” That’s how Fed Chairman Jerome Powell described the conditions under which the institution would begin reducing its monthly bond purchases — currently $120 billion — as part of his regime of “qualitative easing.” Shrinking the money supply, or even talk of shrinking the supply, is expected to lead to higher interest rates and,…
In a speech at the annual Jackson Hole symposium, Federal Reserve Chairman Jerome Powell said the central bank is likely to begin withdrawing some of its pandemic policies before the end of the year. Still, interest-rate increases won’t be coming overnight.
That means the Fed will likely begin cutting the amount of bonds it buys each month before the end of the year. But Powell stressed that these cuts should not be seen as indicators that rate increases are around the corner.
“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent…
