Follow Patrick Linkedin Facebook
Email Patrick Email
Financial
Mar 21, 2016

Fed Leaders Keep Interest Rates Low – For Now

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

In a recent press release from the Federal Open Market Committee, the tone is cautiously optimistic. Littered throughout the release is the word, “however.” Things are good, but other things are bad. Also, some factors are positive, yet be mindful: Others are negative.
 
Maybe it’s more accurate to say the tone was carefully moderated hopefulness. Or maybe conservative pessimism is better?
 
Before I get lost in the semantics, it’s worthwhile to note the following: “Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft.” Moreover, job gains have been strong, the labor market has witnessed a degree of strengthening, and inflation has been rising.
 
But the Fed points out that inflation levels are still hovering underneath their objective for the long-term, which is 2 percent. This is partially a result of the decline in energy prices, as well as the prices of non-energy imports.
 
For those with the work ethic or knowledge to decipher the academic jargon contained within the release, the message was clear. The Fed believes that recent analyses of economic data show that everything is basically alright, but there are storm clouds on the horizon. One of the main reasons the Fed thinks there could be trouble in paradise is the worry about “global economic and financial developments,” also known as the drop in oil prices and the effect that has had on micro- and macro-economies.
 
Simply put, corporations and countries affected by the price of oil have had some of their toughest years in recent memory. This is making the Fed a little gun-shy about increasing interest rates in the short term.
 
Considering that the Fed is forced to walk a tightrope when it comes to its communications, it’s easy to see why it could be viewed as non-committal. Approach the negative too closely, and markets react negatively. Stray too close to the positive and people will ask why rates were not increased.
 
The Fed’s conclusions support this point, since it expects that “economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However,” (there’s that word again) the actual path of interest rates will depend on economic data made available to us moving forward.

Thus, the Fed leaders move away from the point they made in the previous sentence, making everyone aware they will adjust their fighting stance to match the condition of the economy as it changes. In essence, Fed leaders are letting everyone know they will do their job.

The takeaway is that the Fed is deciding to keep short-term interest rates low. The chart below shows that bond traders were happy with the Fed’s decision, so they bought bonds and prices went up. When bond prices increase, interest rates go down, and this is a cause for celebration for anyone who might be shopping for a home. 

For a free consultation about what this means for your purchasing power, contact me at the number below.
 
Patrick Stoy (NMLS Numbers 39527 and 39166) has 16 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or (910) 509-7105.
 

Other Posts from Patrick Stoy

Mcm 14jan insight
Ico insights

INSIGHTS

SPONSORS' CONTENT
Yasminheadshotwithlogo

Why Volunteer for a Nonprofit Board?

Yasmin Tomkinson - Cape Fear Literacy Council
Mike stonestreet 300x300

Stay Off The Naughty List When Planning Holiday Events

Mike Stonestreet - CAMS (Community Association Management Services)
Chadwoutersheadshot

Don't Miss Out on this Year-End Tax Strategy

Chad Wouters - Earney & Company, LLP

Trending News

I-140 Bypass, Set To Open Soon, To Pave Way For Development

Christina Haley O'Neal - Dec 13, 2017

Aloft Hotel Plans Formally Submitted To City

Cece Nunn - Dec 11, 2017

TowneBank Subsidiaries, Construction Firm To Fill New Wilmington Office Building

Cece Nunn - Dec 12, 2017

Technology Firm Setting Up Lab In UNCW Facility

Cece Nunn - Dec 12, 2017

Award Winning Food Truck Relocating To The Port City

Jessica Maurer - Dec 13, 2017

In The Current Issue

Dosher Foundation Announces $2M Fundraising Program

The Dosher Memorial Hospital Foundation recently kicked off a major gifts campaign by recognizing more than 50 donors who already have donat...


Survey Shows Change In Retirement Priorities

People planning and saving for retirement these days aren’t as focused as their parents might have been on leaving a big chunk of change for...


Local Systems Respond To Opioid Abuse

Major health care providers in the region, including New Hanover Regional Medical Center, Wilmington Health and Novant Health, are taking st...

Book On Business

The 2017 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2017 Health Care Heroes
Major Developments
WilmingtonBiz Expo - Key Note Lunch with Keynote Lunch with Chip Mahan - 2016