The 10 brilliant minds who make up the Federal Reserve met yesterday to once again discuss the state of the economy and determine the action needed by them to aid a struggling American economy. For the 2nd time in a row, they chose to keep the Fed funds rate steady at 2%.
The following is an official press release from the Fed regarding its decision today, and a translation (for the rest of us) of all the financial jargon by Bob Walters, Chief Economist for Quicken Loans:
Release Date: September 16, 2008
For immediate release
Bob: Now
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Bob: The 10 people who determine the direction of short term rates (Federal Open Market Committee or FOMC) decided to keep the short term rate that banks lend money to each other at 2%.
Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction, and some slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth.
Bob: The Fed is acknowledging that the financial markets (banks and Wall Street firms and others) are struggling. The Fed is also indicating here that they are seeing the economy slow down – because people like you and I are spending less money. They also are predicting that the next six months or so will probably be a little rough from an economic standpoint – as loans become tougher to get and as the housing market continues to struggle. But, the Fed believes the things they’ve done (lower rates and lots of money for troubled companies) will help turn things around.
Inflation has been high, spurred by the earlier increases in the prices of energy and some other commodities. The Committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain.
Bob: The Fed is saying they have seen prices rising a lot – mostly because gasoline and food prices have been rising so much. However, the Fed thinks prices will start to fall in the next six months or so (although, they aren’t 100% sure).
The downside risks to growth and the upside risks to inflation are both of significant concern to the Committee. The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
Bob: The Fed is saying they are worrying about inflation AND recession (they’ve got a lot on their minds!) And, they say that they will keep watching their reports and will do what they need to do.
Me: So there you have it! At this point, with all the news and changing in the mortgage market, mortgage rates are near historic lows. If you are in the market for a home loan, you can get in touch with us at Quizzle and we’ll hook you up with an experienced Quicken Loans mortgage banker. E-mail me at klavaute@quizzle.com or you can even find Quizzle on Twitter.