fed funds rate

The Week In Review (November 05, 2007) : What To Watch For

November 4, 2007

As we saw last week, the economy is simultaneously hot and cold.  This makes for a strange ride on Wall Street because stocks and bonds tend to move on emotion rather than on fact. This “mob mentality” is one reason why mortgage rates have bounced up and down so much lately. For example, we saw […]

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What Is The Fed Funds Rate?

October 31, 2007

The Federal Open Market Committee adjourns from its two-day meeting this afternoon and is widely expected to lower the Fed Funds Rate.  This does not mean that mortgage rates are being lowered, too. The definition of Fed Funds Rate from the Federal Reserve: The federal funds rate is the rate charged by one depository institution […]

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The Week In Review (October 29, 2007) : What To Watch For

October 29, 2007

Strong earnings from Apple, American Express, Microsoft and Boeing helped to keep markets in balance last week after reports of weak business spending and poor housing data (again). The available data doesn’t seem to match corporate earnings reports and that is giving investors fits. Mortgage rates bounced around last week on the lack of conviction […]

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Is A Fed Funds Rate Cut Good News Or Bad News? It Depends On Your Perspective.

October 26, 2007

The Federal Open Market Committee is widely expected to lower the Fed Funds Rate next week. For holders of credit cards and home equity lines of credit, this is good news. Both of these financial products feature interest rates tied to Prime Rate. Prime Rate is tied to the Fed Funds Rate. When the Fed […]

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How Japan And China Can Impact The Mortgage Rate On Your Home

October 17, 2007

Mortgage rates are determined by the prices of mortgage bonds; this, we’ve covered before.  As bonds prices go up, bond rates come down. And the price of a mortgage bond is a matter of Supply and Demand. The greater the demand for a bond, the higher its price.  High demand for bonds is one reason […]

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How Today’s Employment Data Is Hurting Mortgage Rates

October 5, 2007

On the first Friday of each month, the Bureau of Labor Statistics releases its employment report for the United States. Last month, the jobs report showed that the economy actually lost jobs for the first time since 2003.  The total loss of jobs equaled 4,000 and contributed to the Federal Reserve’s decision to lower the […]

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Want More Proof That The Fed Doesn’t Control Mortgage Rates?

September 21, 2007

For more proof that the Fed does not control mortgage rates, consider this: In the immediate aftermath of the Fed’s decision to lower the Fed Funds Rate by 0.50%, mortgage rates improved by about 0.125% on average. But, in the two days since, mortgage rates have not only given back those gains, but have approached […]

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How Prime Rate Relates To The Fed Funds Rate

September 20, 2007

Prime Rate is currently 7.750%. Prime Rate is the “shorthand” name for the Wall Street Journal Prime Rate, a variable interest rate that is used in pricing many types of consumer loans. These loans include: Home equity lines of credit Credit card loans Auto loans Prime Rate’s variable nature is tied to the Fed Funds […]

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The Week In Review (September 17, 2007) : What To Watch For

September 17, 2007

The volatile path of mortgage rates last week followed the changing expectations for Tuesday’s Federal Open Market Committee meeting. The FOMC sets the Fed Funds Rate, a benchmark interest rate upon which Prime Rate is based. According to Federal Funds Rate futures, there is a 94 percent chance that the Fed will lower the FFR […]

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What The Price Of Gold Says About The Economy

September 13, 2007

Headlines today read that the value of gold is nearing its all-time high (adjusted for inflation).  The lay people would ignore this story, but those in the know understand that the price of gold is usually reflective of the state of the global economy. The spot price of gold tells a lot about investor psyche […]

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Why Mortgage Rates Fell BEFORE The Fed Meeting September 18

September 12, 2007

Mortgage rates “come from” one place only: the prices of mortgage bonds as determined by investors. The higher the price, the lower the corresponding return, or rate. Bonds — like stocks — are traded as securities.  An investor may buy Microsoft stock if he thought the company’s future looked bright, and he may buy mortgage […]

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How Today’s Jobs Report Impacts Mortgage Rates

September 7, 2007

This morning, the government reported that the U.S. economy lost 4,000 jobs in August.  Led by losses in manufacturing and in construction, this is the first time since 2003 that the economy has failed to add jobs in any given month. Markets had been expecting a job gain of roughly 110,000, but many players on […]

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Traders Predict The Fed Funds Rate Future Using Options

September 6, 2007

The Federal Open Market Committee meets September 18 and traders are aren’t quite sure what to expect with respect to the Fed Funds Rate. Will the FFR stay unchanged?  Will it FFR decrease?  If it decreases, by how much?  These are questions that are perplexing market participants. Luckily, we can measure how the market is […]

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The Fed Descends On Jackson Hole, The Market Won’t Get What It’s Looking For

August 31, 2007

Today is a holiday-shortened session but that doesn’t mean that the markets will be on vacation. The day’s big event is Federal Reserve Chairman Ben Bernanke’s speech at the Fed’s annual symposium in Jackson Hole, WY. Investors will dissect every phrase looking for clues about the economy and housing. More importantly, markets want some advance […]

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Like The Fed Funds Rate, The Fed’s Discount Rate Does Not Control Mortgage Rates

August 21, 2007

Friday, the Federal Reserve lowered its Discount Rate by 0.50% in an effort to preserve liquidity among our nation’s banks. This has nothing to do with mortgage rates that people like you and I get for our homes.  Well, not directly at least. The Discount Rate is the rate at which banks borrow money from the […]

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The Fed Funds Rate Does Not Directly Impact Mortgage Rates

August 14, 2007

It’s been on the news a few times lately, so let’s address a key misconception about the Fed and its relationship to mortgage rates. The markets now anticipate that the Fed will lower the Fed Funds Rate within the next 45 days.  As a mortgage rate shopper, there’s not much reason to be interested.  That’s […]

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Awaiting The Fed’s Next Statement

August 7, 2007

The stock market bounced back yesterday from Friday’s losses, adding 287 points.  There wasn’t much activity in mortgage rates, though, which remained relatively flat. Right now, it’s all eyes on the Federal Open Market Committee and their 2:15 P.M. ET press release. For as many people that want the Fed to make a powerful statement about […]

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The Week In Review (August 6, 2007) : What To Watch For

August 6, 2007

In a week in which several high-profile mortgage lenders closed their doors, not all news was bad. Mortgages rates for home loans bought by the quasi-government groups Fannie Mae and Freddie Mac actually dropped a bit. If you only watched the news, or market commentary on CNBC, though, you likely have the wrong idea about […]

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How Ben Bernanke’s Testimony To Congress Is Moving Mortgage Rates

July 18, 2007

Despite lower prices at the gas pump, the Consumer Price Index increased a little bit more than expected in June. According to the Bureau of Labor Statistics, CPI rose 0.2% versus the 0.1% expected by economists CPI tries to answer the question “How expensive is everyday life?”.  Over the last 12 months, says the government, “life” […]

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The Week In Review (July 2, 2007) : What To Watch For

July 2, 2007

As expected, Ben Bernanke & Co. left the Fed Funds Rate unchanged at 5.250% last week but that didn’t stop markets from improving slightly overall. Markets were buoyed by a low reading on last Friday’s PCE index, the Fed’s favored inflation measure. Low inflation readings are good for mortgage rates so it’s no surprise that […]

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