Posted tagged ‘Federal Reserve’

Fed Considers Ending Stimulus Program

July 16, 2014

federal-reserveEnding this program is a very good thing and a significant sign that  recovery is indeed under way. For a more detailed look at this subject – please read the article below.

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The Federal Reserve appears to be confident enough in the trajectory of the United States economy that it looks to be planning to stop adding to its bond holdings in October, according to the minutes of the June Federal Open Market Committee meeting.

The decision has been months in the making. Fed policymakers have tapered their government bond purchases in $10 billion increments at each Committee meeting since December, cutting them to $35 billion a month from $85 billion. At the current pace, the Fed would be buying $15 billion in Treasury bonds and mortgage-backed securities by its October meeting.

The purchases are intended to reduce borrowing costs for businesses and consumers and to encourage risk-taking by investors but have been the subject of some controversy as inflation concerns persist among some economists.

Economists at large have speculated that the Fed may reduce bond purchases by $15 billion instead of the customary $10 billion pattern that it has displayed so far.

Closing out the program would be of considerable symbolic significance to the financial markets and to the American public that the economy is now capable of standing on its own two feet and does not need the Fed’s stimulus funding to prop it up.

The symbolic reality is not lost on the Fed.

The policy makers agreed to communicate to the public later this year about the mechanisms that the Fed will use to bring up rates, as it is feared that bringing up the benchmark interest rate may not be enough because of the amount of cash in the system.

To read the complete article – please use the link below.

Ending Stimulus Program

Fed: Taper Continues; Adjust Economic Projections

June 21, 2014

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This is good news. The federal government should not have to “Buy” a stable economy. For a more detailed look at this subject – please read the article below.

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The Federal Open Market Committee (FOMC) concluded its June meeting with the announcement that members have once again voted to bring down the Federal Reserve’s stimulative monthly asset purchases.

Taking a cue from improvements in labor market indicators, household spending, and general economic activity, the committee members voted to reduce the Fed’s monthly purchase of agency mortgage-backed securities (MBS) to a pace of $15 billion per month, while purchases of longer-term Treasury securities will be cut to $20 billion per month.

Together, the cuts represent a scaling back of $10 billion in monthly additions, keeping with the committee’s pace so far. If the current course continues, the so-called “taper” could conclude by fall.

However, as usual, the FOMC made a point that “asset purchases are not on a preset course, and … will remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.”

Despite seeing overall improvement in the economy, board members did readjust their economic projections in light of recent news of a downturn in the first quarter.

For 2014, the committee now projects a 2.1–2.3 percent change in real gross domestic product (GDP), a sharp drop from March’s projection of 2.8–3.0 percent growth.

On the other hand, labor forecasts were more favorable. By the end of the year, the committee—perhaps encouraged by recently improved jobs numbers—expects the unemployment rate to be as low as 6.0 percent.

To read the complete article – please use the link below.

Fed: Taper Continues

Why so Few Houses for Sale? Lots of Reasons.

December 10, 2013

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This is a pretty complete overlook of the inventory shortage. The one major factor that was not touched on by this article is the lenders, for a lot of different reasons, are not putting many of their foreclosed homes on the market as fast as they used to and therefore there are less of these homes for sale. For a more detailed look at this subject – please read the article below.

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Inventories of homes for sale have been slow to bounce back since the 2007–09 recession, despite steady price appreciation since January 2012.

Normally, higher prices reflect robust sales. But lately, prices have been rising even though sales remain stuck at relatively low levels. The National Association of Realtors reports that an annualized 4.5 million homes were sold in June 2013, roughly the same as at the end of the 1990s.

Many prospective buyers attribute the low sales volume to a lack of inventory on the market. So why are there so few homes for sale? There are lots of reasons why.

William Hedberg, a research associate, and John Krainer, a senior economist, both with the Federal Reserve Bank of San Francisco, examine some of the factors affecting this “more complicated than normal” situation in a recent paper. Here are their key findings:

Many homeowners are still underwater. Many properties are still worth less than the value of their mortgages, which would leave sellers owing additional money at closing.

As a result, a large number of homeowners are waiting for house prices to rise, allowing them to recover lost equity. They delay putting their homes up for sale until the situation improves and they can make back enough to cover the down payment on their next purchase.

To read the complete article – please use the link below.

Few Houses for Sale

Senate Banking Committee Approves Yellen Nomination for Fed Chair

November 24, 2013

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Of all the people that have been suggested for this post Dr. Yellen seems to be the best choice. Her understanding of the importance of job creation is a very encouraging point in her favor. For a more detailed look at this subject – please read the article below.

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The Senate Banking Committee has voted to approve Janet Yellen’s nomination to chair the Federal Reserve, bringing Yellen one step closer to being the first woman to serve as head of the country’s central bank.

The committee approved Yellen’s nomination by a vote of 14-8, passing it to the Senate floor for a final vote.

Currently serving as the Fed’s vice chair, Yellen is viewed by many on Wall Street as a “dove” on monetary policy who is more concerned with unemployment than inflation.

In her nomination hearing before the committee on November 14, she defended steps the Fed took to stabilize the economy following the economic crash, putting an emphasis on the number of jobs regained. Like her predecessor, Ben Bernanke, she is expected to push for accommodative monetary policy as the economy slowly recovers.

With Senate Democrats and several Republicans supporting her nomination, her confirmation seems likely.

To read the complete article – please use the link below.

Yellen Nomination for Fed Chair

Fed’s Bond-Buying Program Maintains Pace with 11-1 Vote

November 1, 2013

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If the Fed is going to keep interest rates at almost 0% and also keep buying bonds at an $85 Billion a month clip until unemployment reaches 6.5% you can look forward to a long stretch with no change in the fed’s policy. For a more detailed look at this subject please read the article below.

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Analysts holding out for a sign that the Federal Reserve may soon taper its asset purchasing program will have to continue waiting: The Fed released on Wednesday the latest Federal Open Market Committee (FOMC) statement, revealing a generally cautious attitude among members as the economy struggles against headwinds.

In its statement, the FOMC says information received since September “generally suggests that economic activity has continued to expand at a moderate pace”—a more uncertain statement than the one expressed in September.

In the labor markets, the committee noted that “conditions have shown some further improvement,” though the unemployment rate is still elevated.

On the subject of housing, the FOMC noted growth has slowed in recent months; however, unlike the September statement, October’s release does not cite rising mortgage rates as a concern. With Washington’s troubles on the backburner for now, it remains to be seen what kind of trend interest rates will take on.

Despite continued improvements and greater economic stability, the committee said it will wait for more evidence of sustainable progress before adjusting the pace of its $85 billion-per-month asset purchases, an initiative first undertaken last fall to keep interest rates down and maintain an accommodative financial environment.

However, the FOMC left open the possibility of a taper in the future, asserting that “[a]sset purchases are not on a preset course” and saying future decisions about their pace will be based on the committee’s economic outlook.

To read the complete article – please use the link below.

Fed’s Bond-Buying Program

Regulators See No Fair Lending Risk in QM

October 24, 2013

green-lightThis is a good move by these 5 agencies. It would be nice if we had more of this from the bureaucracies. For a more detailed look at this subject please read the article below.

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Five federal agencies issued a statement Tuesday assuring creditors that they do not run the risk of being found in violation of fair lending laws should they choose to only originate “qualified mortgages” (QM) as defined earlier in the year.

The Consumer Financial Protection Bureau (CFPB), one of the five issuers of Tuesday’s release, handed down in January a number of guidelines for lenders to follow in order for their loans to be classified as QM (and thus “safe” should legal action arise). A major provision of those guidelines is the Ability-to-Repay (ATR) rule, which requires creditors “to make a reasonable, good faith determination that a consumer has the ability to repay a mortgage loan before extending the consumer credit.”

In response to CFPB’s rulemaking, some bankers have indicated they might limit their offerings to only QM products as the transition is made—and many are concerned as a result that their operations may run counter to the guidelines outlined in the Equal Credit and Opportunity Act (ECOA), implemented by the Federal Reserve’s Regulation B.

However, those fears are unfounded, regulators say.

“In the agencies’ view, the requirements of the Ability-to-Repay rule and ECOA are compatible. ECOA and Regulation B promote creditors acting on the basis of their legitimate business needs,” the interagency release reads. “Viewed in this context, and for the reasons described below, the agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk.”

To read the complete article please use the link below.

No Fair Lending Risk

Household Net Worth Growth Slows in Q2

September 29, 2013

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This is a great indication of how much the housing industry impacts the national economy. When home sales slow down so will the growth of net worth and vice versa. Please read the article below.

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Household net worth improved $1.3 trillion in the second quarter — half as fast as the first quarter — as real estate values grew $626.7 billion, the Federal Reserve reported Wednesday in its quarterly Flow of Funds report.

But, with a drop in mortgage debt — including home equity loans and lines of credit –- from $9.39 trillion in the first quarter to $9.34 trillion in the second, homeowner equity grew to 49.8 percent in the second quarter from 48.1 percent in the first.

Household investment in the stock market grew $265 billion in the second quarter compared with $929 billion in the first when overall net worth grew $2.8 trillion.

Owners’ equity as a percentage of real estate value has been on a steady upward trajectory since dropping to 36.3 percent in the first quarter of 2009. It rose to 45.4 percent at the end of 2012 and to 48.1 percent one quarter later. The 2.7 percentage point increase in the first quarter of this year is the fastest quarter-to-quarter growth this century. Even with the increase, though, the equity percentage remains sharply lower than 57.7 percent in 2000.

After falling $223 billion in the first quarter, disposable personal income grew $98.6 billion in the second. The first quarter drop reflected the rollback of the cut in payroll taxes which ended January 1. With the increase, second quarter disposable personal income — essentially after-tax income — was $12.39 trillion, about $130 billion less than the record $12.52 trillion in the fourth quarter last year.

To read the complete article please use the link below.

Household Net Worth