The Meeting of the Federal Reserver Board will adjourn at 2:15pm today, and as is customary, Fed officials will speak. Normally, we have waited to see if the Fed will lower (or raise) interest rates, and both stock and bond investors respond accordingly. They cannot do that today, because the Fed Funds rates sits at .25%.
So, what can they do that will have any effect? Plenty. And from this article form Yahoo Finance page, it appears the Fed may begin to buy up other consumer debt securties, such as car notes, student loans and credit card debt-backed securities. Just like they are buying up Mortgage Backed Securities, which is what is causing mortgage rates to remain as low as they have. Sort of an artificial low.
The interesting this in the article cited above is that the Fed may buy up long-term Treasury securities.
Huh? Doesn’t that strike you as the the same as an average American paying off one credit card balance with a new credit card, to allow more room for spending on the original card? That was my first impression.
So, we will see. The thing to watch for in the Fed comments is a fear of increasing inflation. I do not expect that at all at the end of this meeting, but the mere mention of inflationary fears will send mortgage rates up. Anything else, should be good for rates. Should is the key there, since the Fed is treading into unchartered waters, and there is no telling how investors will respond.
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