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“Party on, dude” says the Federal Reserve

March 21, 2021 · by Andrew Oliver · in Latest News, Mortgage and Finance News

Former Federal Reserve Chair William McChesney Martin, Jr famously said: “The Federal Reserve…is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”

This week, current Fed Chair Jerome Powell in effect said “party on, dude.” As the New York Times commented: “The official view of the central bank’s leaders now is that it has been an overly stingy host, taking away the punch bowl so quickly that parties were dreary, disappointing affairs.
The job now is to persuade the world that it really will leave the punch bowl out long enough, and spiked adequately — that it will be a party worth attending. They insist punch bowl removal will be based on actual realized inebriation of the guests, not on forecasts of potential future problematic levels of drunkenness.”

Chairman Powell’s comments
“We will continue to provide the economy the support that it needs for as long as it takes.”
“We’re not going to act pre-emptively based on forecasts for the most part, and we’re going to wait to see actual data. And I think it will take people time to adjust to that, and the only way we can really build the credibility of that is by doing it.”
“People start businesses, they reopen restaurants, the airlines will be flying again — all of those things will happen, and it will turn out to be a one-time bulge in prices, but it won’t change inflation going forward.”

Interest rates and inflation
The big questions overhanging financial markets are what will happen to inflation and to interest rates.
(more…)

Mortgage rate outlook after Federal Reserve increases rates

December 17, 2016 · by Andrew Oliver · in Market Reports, Mortgage and Finance News

For the second time since the introduction of the iPhone (the first was in December 2015) the Federal Reserve (Fed) increased interest rates this week. The increase, like last year’s, was 1/4%. What does this mean for mortgage rates? The key is to understand which rates are impacted by the Fed Funds rate and which are dependent upon interest rates set by the market.

Which rates are based upon the Fed Funds rate?
30 year fixed rate mortgages (FRN) are not based on the FF rate, but are most closely tied to the yield on 10 year US Treasuries(10T). More on that in a minute. (more…)

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