QE3 Archives - Page 2 of 5 - George L. Duarte

Putting the FOMC statement in plain English The Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday.

For the ninth consecutive meeting, the vote was nearly unanimous. And, also for the ninth consecutive meeting, Richmond Federal Reserve President Jeffrey Lacker was the lone dissenter in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that, since its last meeting six weeks ago, the U.S. economy has been expanding “at a moderate pace”, led by growth in household spending. However, “strains in global financial markets” continue to remain threat to U.S. economic growth, a comment which references to the Eurozone and its economy.

The Fed’s statement also included the following economic observations :

Growth in employment has been slow; unemployment is elevated
Inflation pressures remains stable, and below 2%
Business spending on equipment and structures has slowed

In addition, the Fed addressed the housing market, stating that there have been “further signs” of improvement, “albeit from a depressed level”.

Finally, the Federal Reserve re-affirmed its commitment to its most recent stimulus program, a bond-buying program known as QE3.

Via QE3, the Federal Reserve has been purchasing $40 billion in mortgage-backed bonds monthly, with no defined “end date”. QE3 is meant to suppress U.S. mortgage rates.

Fed Chairman Ben Bernanke has said that QE3 will remain in place until the U.S. economy has recovered in full, at least. It’s a plan that may help home buyers in Illinois and nationwide. Since QE3 launched, mortgage rates have moved to new all-time lows.

The Fed also used its meeting to announce that it intends to hold the Fed Funds Rate near its target range of 0.000-0.250 percent until mid-2015, at least.

The FOMC’s next scheduled meeting is a two-day event and its last of the year, December 11-12, 2012.

Fed Minutes September 2012 The minutes from the Federal Reserve’s September Federal Open Market Committee meeting were released Thursday.

The Fed Minutes detail the discussions and debates which shaped the central banker’s launch of its third round of qualitative easing since 2008. The minutes also give Wall Street insight into future monetary policy.

At 6,987 words, the Fed Minutes provides a level of detail that was unavailable via the FOMC’s post-meeting press release, a documen that, by contrast, ran 562 words.

Despite its large word count, there was very little that was new or surprising in the Fed Minutes, though. This is because, since the Fed’s last meeting, Federal Reserve Chairman Ben Bernanke has publicly clarified and re-iterated the Fed’s positions on employment, housing and inflation.

The minutes provide a strong backdrop to his comments, however.

For example, with respect to the jobs market, Fed members deemed employment “disappointing”, noting that growth in payrolls has been slower in 2012 as compared to 2011, and that the expansion rate of today’s job market is too slow to make significant progress against the national unemployment rate.

The Fed Minutes also included the following notes :

On housing : Further improvement is occurring, albeit from a “depressed level”
On inflation : Risks appear “tilted to the downside”, but energy costs pose risks
On Europe : A “slight improvement”, but still a risk to global economic activity

Of greatest interest to home buyers in Minneapolis and rate-shopping refinancers, though, was the Fed’s discussion of its QE3 program. The program was introduced to help suppress mortgage rates nationwide which, the Fed believes, will make “broader financial conditions” more accommodative.

The Fed plans to purchase $40 billion in mortgage-backed bonds monthly for a “considerable” period of time after the U.S. economy has already shown signs of full recovery and, since the launch of QE3, 30-year fixed rate mortgage rates are down 19 basis points to 3.36% nationwide, on average.

The next Federal Open Market Committee meeting is scheduled for October 23-24, 2012.