Fed Fending Off Rate Rise?

August 1, 2013

The Federal Reserve announced Wednesday that it will continue purchasing $85 billion in bonds each month — at least for now. The Fed’s bond-purchasing program has helped move mortgage rates to their lowest levels on record in recent months. However, the Fed has signaled that the program could likely come to an end soon, causing a shift upward in mortgage rates. 

"The Fed did not mention why mortgage rates have risen — which almost certainly is due to market expectations of tapering in the near future and may have influenced the Fed in not changing its guidance," Econoday analysts said. 

The economy added 200,000 new jobs last month, 20,000 of which were construction jobs due to an upswing in housing. The job growth could point to less need for the bond-purchasing program. 

Federal Reserve chairman Ben Bernanke has made recent comments that a slowdown in bond-buying could begin some time this year. 

Source: “First Take: Fed waiting, but jobs tell real story,” USA Today (July 31, 2013) and “Fed recommits to current pace of MBS purchases,” HousingWire (July 31, 2013)

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