FED STAYS ON COURSE !

Fed Stays the Course on Mortgage Bond Buying, Interest Rates Fall

After a two-day meeting, the Federal Reserve’s Federal Open Market Committee decided to maintain “its existing policies of reinvesting” in mortgage-backed securities (MBS) in order to bolster the faltering housing market and broader economy.
“The housing sector is a very important sector,” Bernanke said at a press conference in Washington after the meeting, as quoted in BusinessWeek. The Fed hopes to bring long-term interest rates even lower by buying up MBS, which will (hopefully) allow more homeowners to refinance and plug their monthly savings back into the economy.
And because the Fed “anticipates that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013″ it left its target rate in the range of zero to 0.25 percent.

“I’m dissatisfied with the state of the economy,” Bernanke said. “Unemployment is far too high,” and “I fully sympathize with the notion that the economy is not performing the way we would like.”

Meanwhile, mortgage interest rates did fall in the latest week, according to Freddie Mac, with the average on a 30-year fixed rate loan dropping back down to 4.00 percent, excluding points, from 4.10 percent the week before. The 15-year FRM also declined to 3.31 percent from 3.38 percent and the one-year adjustable rate mortgage carried an average rate of 2.88 percent, slipping down from 2.90 percent.
The decrease was blamed on investor concerns about the financial plight of Greece.

“Market concerns over the European debt market drew investors to U.S. Treasury securities, lowering bond yields and mortgage rates,” said Freddie Mac vice president and chief economist.

Yet in contrast to the Fed’s dour report, Freddie Mac reported a bit of good news.

“Meanwhile, on the home front, the U.S. economy continued its gradual recovery,” Nothaft added. “…The economy grew 2.5 percent in the third quarter, the strongest pace in a year… In addition, consumer spending rose 0.6 percent in September, nearly threefold that of August. Finally, consumer sentiment…rose for the second month in a row in October to its highest reading since July.”