The Federal Open Market Committee met yesterday. Many expected the Fed to hold the federal funds rate firm. They did not
Here’s the WSJ’s helpful interpretation of Bernankespeak called Parsing The Fed.
The recent credit crunch development is the likely to accelerate the erosion of the housing market in markets that are already weak. Its inevitable that housing is going to provide a drag on the economy. Before this past month’s credit-related festivities, I had been looking to the Fed to drop rates in order to influence mortgage rates to drop and keep the housing market from slipping further.
Now I am not so sure.
The Fed remains biased towards inflation prevention and I suspect that mortgage rates won’t be impacted so it seems like this FOMC was a non-event as it relates to housing. The flight to quality has pressed investors into treasuries, driving down yields, but lenders are tightening underwriting or pulling out of the mortgage market, so the scarcity of lenders could prevent mortgage rates from falling or even them drive up, no matter what the Fed does.
Someone I know closed on a no-doc home equity loan last friday. The program is being discontinued this friday. We are hearing feedback from lenders that other programs are being discontinued, although I was surprise programs like this still exist given how loose the standards are, so its no surprise.
Tags: Ben Bernanke