Tuesday, June 16, 2015

Chicago's Mortgage Choice - June 16, 2015 Real Estate Report - Here Comes The Fed

For a period of time which was unprecedented, the meetings of the Federal Open Market Committee of the Federal Reserve Board meant nothing to the average American and the markets. After the financial crisis hit, the Fed moved rates down to historic lows. And when the economy was slow to recover, the Fed kept fiscal stimulus going by purchasing the mortgage backed securities and Treasuries. Yet, after this was accomplished there was not much to do until the economic recovery started moving. The economy is producing over two millions jobs per year and now that the economic recovery is much more solid, the Fed is back in the news. Last year, they stopped the aggressive purchase of securities. And now it is inevitable that they will start raising short-term interest rates as the recovery continues to get stronger. Chairperson Yellen as much as guaranteed it in a speech last month. Thus, all eyes will be on the FOMC meeting as it convenes today. In general, we are not looking for the Fed to raise rates this week. But we are looking for a better indication as to when they might make a move at a later meeting, now most likely in September, after the second quarter economic data is released. The markets are already speculating as to how quickly the second move may come. In other words, when rates start up again, how fast will they move? Keep in mind that the Fed directly controls short term rates but only indirectly affects long-term rates through their actions. And long term rates have already started their move upward in anticipation of the Fed's moves. Keith Stewart 773-529-7000