The Fed left the Fed Funds Rate unchanged when they met on Wednesday. The Fed is in a tough position right now... Inflation is hitting us all with higher prices at the gas pump and food and almost everywhere we turn. And the Fed's best way to combat inflation is to raise rates.
But, they just started lowering rates last September and the 1st quarter of 2008. These Fed cuts were to spur on the economy and the housing market.
The Fed can "feel" the inflation, yet also want to see more growth and a stronger housing market. Bernanke has done a pretty good job so far; it will be interesting to see what he does and hear how he positions the Fed over the next few months.
Below is a chart showing the price of bonds from March 23rd thru to yesterday. The red you see is bond prices dropping and green is bond prices increasing. When bond prices go down, mortgage rates go up and vice versa. A volatile market for sure. Notice the steep drop from about May 23rd thru June 23rd... that is a 250 Basis Point drop, resulting in a 1/2% increase in 30 year fixed rates.
Ken Pederson is a Certified Mortgage Planner with the CMPS designation and works at FAIRWAY Independent Mortgage in Lancaster, PA. Ken can be reached at 717-431-9299.
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