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Mortgage Rates Waiting for FOMC
June 22nd, 2009 9:17 AM

All the news suggests the lower rate. And we have the rate a little bit better today. No big news this week except the FOMC meeting.

FOMC members, who meet June 23 and 24 to map monetary strategy, have already indicated the need to keep interest rates low for
a "long time" to help revive growth.

Rising Treasury bond yields, though, show that Wall Street is
concerned that their policy may lead to an inflationary bubble.
Ten-year notes reached an eight-month high of 3.95 percent on
June 10th. The market is concerned about excess supply and does
not yet understand the Fed’s exit strategy.

On the other hand, the risk is that higher rates will hold back
the budding economic recovery by lifting borrowing costs for
existing homeowners and prospective buyers. Economists surveyed
by Bloomberg forecast growth of only 0.5 percent in the third
quarter, followed by the prior four consecutive quarters of
shrinking GDP. The World Bank estimated in its annual
development-finance review that GDP in developing countries will
grow just 1.2 percent this year, well off the 8.1 percent pace
set in 2007 and the 5.9 percent gain in 2008.

The challenge ahead for Bernanke and his colleagues is to balance
any optimism with caution and communicate to the markets the
clear view on rates and the exit strategy on more than one trillion
dollars already pumped into the economy. They are standing at a
critical crossroads.


Posted in:General
Posted by Eric Fang on June 22nd, 2009 9:17 AMPost a Comment

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