Why the Federal Reserve Matters

Thanks to Jessica Regan with GMH Mortgage Services for allowing me to share this Market Update with you.   After I read this I thought about how much I know about the Federal Reserve and realized it wasn't much.   This was good information and I trust you will find it interesting and useful.

 

Why the Federal Reserve Matters

 

We spend a good deal of time talking about the Federal Reserve, and we do so for a good reason: The Federal Reserve is the most important economic planner in the country. The Fed is charged with promoting employment, stabilizing prices, and regulating the financial sector. Not surprisingly, it holds tremendous sway over both the housing and mortgage markets.

 

We frequently monitor the Fed to get an idea where lending rates are headed. Last week, we mentioned that we thought lending rates would hold today's lower levels. We've become more convinced that the Fed won't step back from quantitative easing or raise short-term rates soon. We say that because the Fed has targeted a 6.5% unemployment rate and a consumer-price inflation range of 2% to 2.5%.

 

On the former, the goal isn't close to being reached. Unemployment still runs well over 7%, and it's only that low because of a falling labor participation rate. As for consumer-price inflation, it still runs well below 2%. Much of the new money the Fed has pumped into the economy, instead of flowing into the consumer sector, is finding its way into asset. It's no coincidence that stocks are at an all-time high.

In short, the Fed has plenty of room and plenty of incentive to keep pumping money and to hold mortgage lending rates low. We don't see that changing in the near future.

 

 

 

 

Joy

Joy Daniels, GRI, ABR, CSP, e-PRO
JOY DANIELS REAL ESTATE GROUP, LTD
2793 Old Post Road, Suite 200
Harrisburg, PA  17110

(717) 695-3177  office - Call TODAY and let me help you find your dream home!

www.joydaniels.com

Joy@JoyDaniels.com - Email TODAY and let me help you find your dream home!

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Comment balloon 3 commentsJoy Daniels • November 11 2013 06:55AM
Why the Federal Reserve Matters
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Thanks to Jessica Regan with GMH Mortgage Services for allowing me to share this Market Update with you. After I read this I thought about how much I know about the Federal Reserve and realized it wasn't much. This was good information and I… more