What’s happening with Mortgage Interest Rates?
It looks as Uncle Ben foresees future policy changes in three stages. Stage one is ending asset purchases, which depend when there’s a substantial improvement in the labor market. Stage two will be when unemployment reaches 6.5 percent and inflation under 2.5 percent. Stage three will be control of policy rates.
Uncle Ben anticipates many months of accommodation after asset purchases end and he does see them implementing a staunch policy any time soon. Uncle Ben also points out that they need to keep a watchful eye on mortgage rates and affordability. Uncle Ben even reiterated that by mid-2014 “if” the recovery occurs as anticipated they will end QE
Pertaining to fiscal policy, Uncle Ben noted that monetary policy is not a panacea and that they would welcome help from fiscal policy as the recovery is not as strong as it needs to be. Uncle Ben indicates that they will not recover its balance sheet until after rate hikes commence.
In reality, we can’t foresee “into the future” to reveal the answer to when the rate hikes will happen. Nobody knows if rates will increase or decrease. Everything seems to be based on QE3, and how long it will continue on and pump money into the US system through their 85k per month bond buying program. At this point, I just keep my prayers high, and I am thankful that rates are not at 6 percent right now, could you imagine that scenario.
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