Fed Changes Guidance
Wednesday’s Fed meeting resulted in positive news for mortgage rates. Mixed economic data released over the past week was roughly neutral. Mortgage rates ended the week lower.
As expected, the Fed did not change the federal funds rate. However, the statement contained guidance which reduced the expected number of rate hikes in 2016 from four to two. Reasons for this included a downgraded outlook for U.S. economic growth and inflation, as well as concerns about the pace of global economic growth. The statement was good news for mortgage rates, as this guidance pushes tighter monetary policy further into the future, including the expected timeline for the Fed to begin to reduce its large holdings of mortgage-backed securities (MBS) and Treasuries. The added demand for MBS from the Fed helps to keep mortgage rates low.
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