FOMC keeps rates unchanged, abandons tightening rhetoric

The Federal Open Market Committee left the federal funds rate unchanged on Wednesday, disappointing government officials who have advocated a speedy start to rate cuts. Officials have already made plans for this year.

The Federal Open Market Committee said in a statement at the end of its two-day meeting on Friday that “the Committee does not anticipate lowering the target range until it becomes more confident that inflation is sustainably moving toward 2 percent.”

Perhaps more important is what’s not said in the statement.

“They have removed any language regarding the possibility of future rate increases,” Melissa Cohn, regional vice president at William Raveis Mortgage, noted in an email.

Fed Chairman Jerome Powell confirmed the growing consensus for a rate cut at a subsequent news conference, but also said another meeting could be passed without a meeting.

“I think it’s unlikely that the committee will reach a level of confidence before the March meeting,” he said.

MBS pricing fluctuates on Wednesday, but more reasons why Weak results from New York community banks Walt Schmidt, senior vice president of mortgage strategy at FHN Financial, said this has renewed concerns about the U.S. banking sector and affected U.S. Treasuries.

“It’s bounced back a lot, but the Treasury market is going up a lot right now. So mortgage rates are probably going to be lower tomorrow,” he said in an interview late Wednesday.

Barry Habib, founder and chief executive of MBS Highway, said the Fed’s remarks in March may have had a small impact on the mortgage market, but the interest rate outlook remains uncertain, and the employment data released on Friday may change interest rates again.

Habib said that for now, while the Fed may not be interested in cutting rates in March, it looks like they may cut rates at their next meeting.

“We still forecast that we will cut interest rates by May 1, but have now made March less likely,” he said.

The Fed’s immediate inaction was largely expected but inconsistent with what some members of Congress, including Sen. Sherrod Brown, D-Ohio, and lenders wanted to see. The commission reports regularly to Congress but has autonomy within itself. Monetary policy decisions.

Brown said in a letter to Federal Reserve Chairman Jerome Powell on January 30 that “higher interest rates prevent Americans from achieving the two main ways to create wealth – buying a home and starting or growing a small business.” The letter is First shared by CNN.

Doug Duncan, chief economist at Fannie Mae, said housing market weakness is unlikely to be a top priority for the Fed because valuations remain strong.

“The housing market is definitely growing slowly, but prices are still going up because of supply issues. So I don’t think they’re worried about that,” Duncan said in an earlier interview.

But Duncan said the FOMC may be considering policy changes around the Fed’s holdings of Treasury securities, which are not directly tied to long-term mortgage rates but do affect the outlook for home financing.

“They have to keep an eye on the amount of Treasuries that are going to come into the market this year,” he said.

This may be of particular interest to policymakers because of the relationship between short-term and long-term Treasury securities has been reversed Compared to the usual yield curves they form.

More typically, long-term rates are higher than short-term rates, but the opposite has been happening recently. That raises concerns because it could signal a coming recession and upend some of the typical interest-rate relationships that mortgage lenders and other businesses rely on. in their financing model.

The curve has moved closer to its normal shape since policymakers signaled their intention to enter easing mode at some point this year (and for other reasons, Fannie Mae Recently abandoned calls for recession) – but it’s still a little upside down.

“Looking at the amount of Treasuries that are coming into the market, what does that mean for the shape of the curve? They have to talk about that,” Duncan said.

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