Ben Bernanke and the Federal Open Market Committee spoke with ambiguity yesterday in electing to keep the Fed Funds Rate at 5.250%.
So far, mortgage rates have benefited.
A major goal of the Fed is to manage the expectations of markets. Therefore, what the Fed does is sometimes not as important as what it says.
In yesterday’s announcement, the Fed expressed concern that inflation is not slowing as expected, but also added verbiage that its next move may be to drop the FFR. Previously, the Fed discussed the need for “additional firming” of policy (read: rate hike); that language was removed entirely.
A lower Fed Funds Rate means that money is “cheaper” which tends to be good for consumers and business. Mortgage rates moved lower on the possibility.
