A Simple Explanation Of The Federal Reserve Statement (June 20, 2012)

Wednesday, June 27th, 2012

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday. For the fifth consecutive meeting, the Fed Funds Rate vote was nearly unanimous.  Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.  The Fed Funds Rate has been near zero percent since December 2008.

In its press release, the Federal Reserve noted that the U.S. economy has been “expanding moderately” this year.  Beyond the next few quarters, the Fed expects growth to “pick up very gradually”.  In addition, the Fed re-acknowledged that “strains in global financial markets” continue to pose “significant downside risks” to the U.S. economic outlook.  This statement is a repeat from the FOMC’s April press release and is in reference to the sovereign debt concerns of Greece, Spain and Italy, plus the potential for a broader European economic slowdown.

The Fed’s statement also included the following economic observations :

Fed Minutes Causes Mortgage Rates To Rise Suddenly

Wednesday, April 4th, 2012

FOMC Minutes March 2012The Federal Reserve has released the minutes from its last FOMC meeting, a 1-day affair held March 13, 2012. Mortgage rates in Colorado are rising on the news.   For the un-indoctrinated, 3 weeks after it meets, the Federal Open Market Committee, the sub-group within the Federal Reserve that votes on U.S. monetary policy, publishes its meeting minutes.

Similar to the minutes from a corporate event, or condominium association meeting, the Fed Minutes recounts the conversations and debates that transpired throughout the meeting.  The Fed Minutes is a lengthy publication, often filling 10 pages or more.  By contrast, the more well-known publication from the FOMC — its post-meeting press release — tends to span 6 paragraphs or less.

The extra detail contained within the Fed Minutes is Wall Street fodder, especially given the current economic uncertainty.  Investors look to the Federal Reserve for clues about what’s next for the U.S. economy.  Lately, the minutes has made an out-sized impact on mortgage rates.  The Fed’s words continue to swing the mortgage-backed bond market.  Today is no different.

A Simple Explanation Of The Federal Reserve Statement (December 13, 2011 Edition)

Tuesday, December 13th, 2011

Putting the FOMC statement in plain EnglishTuesday, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.  The vote was nearly unanimous for the second straight month.  Just one FOMC member dissented in the vote, favoring additional policy stimulus beyond what the Federal Reserve currently provides.

In its press release, the Federal Reserve said that the the U.S. economy is improving, noting that since its November 2011 meeting, the economy has been “expanding moderately”.  The Fed also added that domestic growth is occurring despite some “apparent slowing in global growth” — a nod to ongoing uncertainty within the Eurozone.  The Federal Reserve expects a moderate pace of growth over the next few quarters, and believes that the jobs market will continue to improve, but slowly.

Other potential soft spots within the economy include:  

  1. A slowdown in business investment
  2. A “depressed” housing market
  3. Strains in global financial markets