Federal Reserve Stays On Message With July Minutes; 30-Year Mortgage Rates Persist Near 4%
The Federal Reserve does not control mortgage interest rates, but it can exert an influence over them.
Wednesday, with the release of the minutes from its last meeting, that nation's central banker continued to plan for a Fed Funds Rate increase, and a wind-down of its QE3.
Mortgage rates are mostly unchanged after the Fed Minutes' release. 30-year mortgage rates are near 14-month lows.
Click for today's live mortgage rates.
Fed Minutes Show U.S. Economy In Transition
The most recent Federal Open Market Committee (FOMC) meeting was three weeks ago Wednesday and, as is customary, the Federal Reserve released its meeting minutes.
Known as the Fed Minutes, the report is a complete summary of the FOMC meeting, detailing the conversations and debates which transpired among attending Federal Reserve members.
Similar to minutes published after a condo association meets or when corporate shareholders gather, the Fed Minutes highlight key discussion points among attending parties; and key resolutions reached, if any.
Not surprisingly, the Fed Minutes is lengthy.
The report, which covers two days of Fed meetings, is nearly 10 times lengthier than the Fed's post-meeting statement which it issued to markets July 30, 2014.
The extra details in the minutes reveal a Federal Reserve mostly unchanged in opinion from its prior meeting in June. The group remains divided on the health of the U.S. economy, and unsure of the precise amount of stimulus to apply through the end of 2014, and into 2015.
Some Fed members support ending stimulus soon; others ardently oppose that idea. It's a philosophical tug-of-war for the Federal Reserve, and one which has lasted since 2012.
Stimulus can't last forever, though, so the Fed debates how its stimulus will be removed. The discussion is part of the "prudent planning" commenced earlier this year -- and does not imply that policy changes are imminent.
The Fed's current stimulus plans have been good for current mortgage rates. Since the launch of QE3, mortgage rates have averaged below 4 percent and, today, many lenders quote rates in the 3s.
Click here for a live rate quote.
30-Year Mortgage Rates "Attractive"
According to the July Fed Minutes, the nation's central banker discussed macro and micro forces on the U.S. economy. Housing was on one area on which it focused.
Despite low mortgage rates and "relatively affordable" homes, the Fed said housing remains dampened by three factors: (1) Tight credit for borrowers with low credit scores and/or student debt; (2) Too few homes for sale nationwide to meet buyer needs; and, (3) Low demand among younger, first-time homebuyers.
The Fed dubbed 30-year mortgage rates "low".
Also, the Fed discussed inflation.
Inflation is when purchasing power erodes from rising prices and maintaining a stable inflation rate is one of the Federal Reserve's responsibilities. The Fed prefers inflation to run at two percent annually.
Long-term, the Fed expects that target to be met. The group's zero-percent Fed Funds Rate and QE3 program both induce inflationary pressures. These effects have not yet been fully felt within the economy. Someday, the Fed believes, they will.
Until then, mortgage rates are likely to remain suppressed. This is because inflation erodes the value of mortgage-backed bonds and as prices of mortgage bonds fall, mortgage rates rise.
Get Today's Live Mortgage Rates
The Federal Reserve doesn't make U.S. mortgage rates but it can influence them. Fed policies have helped to keep mortgage low, and will play a role when rates start to rise.
See today's mortgage rates now. Rates are available online for free with no social security number required to get started and no obligation to proceed.
Click to see today's live rates.
Copyright Full Beaker, Inc. 2014
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