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24 Jun 10 Federal Reserve Keeps Mortgage Rates at Record Lows

Certainly the Federal Reserve deserves some of the credit for our historic low mortgage rates.  The low interest rates have been the driving force behind the increase in home loan applications for home buying and mortgage refinancing. Today the Fed struck a more cautious tone about the strength of the U.S. economic recovery, indicating Europe’s debt crisis poses a risk to it. Wrapping up a two-day meeting Wednesday, the Fed in a 9-1 decision retained its pledge to hold rates at record-low levels for an “extended period.” Doing so is intended to energize the rebound.  The Fed expressed confidence that the recovery will stay intact despite threats from abroad and at home. But Fed Chairman Ben Bernanke and his colleagues offered a slightly more reserved outlook than the last time they convened.   The Fed said the economic recovery is “proceeding.” That was a bit less upbeat than the view at the April meeting, when the Fed said economic activity continued to “strengthen.” The Fed also said the labor market is “improving gradually.”  While not mentioning Europe by name, the Fed said “financial conditions have become less supportive of economic growth “.largely reflecting developments abroad.”  The fragile economic picture increases pressure on President Barack Obama and lawmakers in Washington. The Federal Reserve indicated that Europe”s debt crisis poses a risk to the U.S. economy and pledged to hold rates at record lows to make sure the recovery stays on track.

Federal Reserve Comments:

HOUSING
April: “Housing starts have edged up but remain at a depressed level.”
June: “Housing starts remain at a depressed level.”

INFLATION
April: “Inflation is likely to be subdued for some time.”
June: “Prices of energy and other commodities have declined somewhat in recent months and underlying inflation has trended lower. … Inflation is likely to be subdued for some time.”

INTEREST RATES
April: Leaves federal funds rate unchanged at a record low of zero to 0.25 percent, where it has been since December 2008, and repeats pledge to keep rates “exceptionally low” for “an extended period.”
June: Leaves federal funds rate unchanged and once again repeats pledge to keep rates “exceptionally low” for “an extended period.”

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06 Jan 09 Federal Reserve Must Have Exit Strategy for Mortgage Loan Programs

In a recent Bloomberg article written by Vivien Lou Chen announces that the Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. central bank must have a “timely” plan for ending lending programs created since the start of the global financial crisis.   “Many of the interventions are novel, so no straightforward methods are available to quantify their effectiveness,” Yellen said in remarks prepared for a speech today in San Francisco. “The Fed must ensure that it has an exit strategy to wind down the facilities in a timely and effective way when they are no longer needed.”

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Fed Chairman Ben Bernanke has created more than $2 trillion of emergency mortgage lending programs since December 2007, using the Fed’s balance sheet and money-creation authority to cushion the economy from the credit crunch. Yellen’s remarks come less than three weeks after Fed policy makers cut the federal funds rate, or the rate banks charge one another for overnight loans, to as low as zero for the first time. The central bank also shifted its focus to the amount and type of debt it buys. “Conditions are still abnormal, but money market functioning has clearly improved relative to the dark days of last September and October,” Read the original article>

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