Fed watchers expect the continuation of loose money policy.
The market is eagerly anticipating the next meeting of the Federal Open Market Committee (FOMC), which is scheduled for next Tuesday and Wednesday, April 27th and 28th. Most analysts believe that the Fed will renew its vow to keep “rates low for an extended period”. While mortgage rates may move higher due to market forces, the Fed seems unlikely to change the discount rate.
Most economists believe it is too early in the recovery process for the Fed to raise rates. Fed watchers speculate that the committee will acknowledge the improving economy, while noting the recovery is still in a precarious situation.
In a speech before the Joint Economic Committee, Federal Reserve Chairman Ben Bernanke said: “The Federal Open Market Committee has stated clearly that they currently anticipate that very low, extremely low rates will be needed for an extended period”.
Bernanke stated the commitment to low rates was predicated upon a variety of economic conditions, including unemployment, including suboptimal capacity utilization, and low inflation. Bernanke said “if those conditions cease to hold and we anticipate changes in the outlook then of course we will respond to that”.
Recent numbers indicate that inflation is under control. The most recent Department of Labor reports showed almost no inflation when the effects of volatile food and energy prices are removed from the equation.
This is the last FOMC meeting until June 22-23, so this is the last chance for the Fed to make any change to the prime borrowing rate for two months. Stay tuned, next week’s meeting should be very interesting.
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