The FED announced that they would continue to float the Federal Funding Rate between 0% and .25%, despite the fact that the feeling is that the economy is improving. The important news relates to their continued purchasing of mortgage-backed securities from Fannie Mae and Freddie Mac. Remember, the FED has been the prime, if not only, purchaser of the bonds this year, and the main reason for the continued low rates. They announced today that they would continue purchasing bonds through the 1st Quarter 2010, which is longer than they originally had forecasted. However, they will be reducing the amount of bonds they will be purchasing on a monthly basis. The consensus of opinion is that rates will begin increasing with the decreased levels of purchasing. However, the increases should be much more gradual than if they continued purchasing at current levels before stopping completely at the end of October.
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