“When E.F. Hutton talks, people listen.” I am reminded of this quote after Ben Bernanke gave the Fed Statement on Wednesday, June 19th. Not only did people listen, but they reacted as well, resulting in a huge bond sell-off that drove up mortgage interest rates. Each month the Fed comes out with their statement reporting on where the market is and what they anticipate doing with policy. This statement impacts the markets, whether stocks or bonds, sending folks to buy or sell after learning the Fed’s direction.
The June report by itself was not all bad, until Ben Bernanke spoke. He went a bit rogue saying,
“The committee currently anticipates that it will be appropriate to moderate the monthly pace of purchases later this year, and if the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”
It was a telling statement that the tapering of quantitative easing is upon us and now everyone will try to figure out how fast and in what way it will happen. How will the Fed phase out their buying of $85 billion mortgage backed securities each month? What do they do with the reinvested payoffs and principle payments?
I believe we will know more when the Fed reports back after their yearly retreat to Jackson Hole, WY in the latter part of August. I suspect the report slated to be issued after the September 18thFed meeting will provide some direction on what we can expect next from the Fed. I will be interested to see how much perspective is provided in this report by Bernanke versus from voting Fed member, Janet Yellen, who many believe will be the next Fed chair appointed by President Obama. So for now, even if the mortgage rates tick up a bit, all is not lost as rates are still at historically low levels. It means it’s still a great time to buy a home, refinance your current loan to a lower term or pull some equity out to cover some necessary family costs.
Thanks to everyone for your thoughts–keep the comments coming, along with your views on mortgage rates and the Fed reports.