After spending the last couple of years framing interest-rate policy in terms of calendar dates, the Federal Reserve abandoned time-based monetary policy in favor of pursuing a more goals-based one. At the moment, and regardless of any declared finish line, mortgage and other interest rates are going nowhere fast.

Record-setting week

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On Monday, we published our annual set of predictions for real estate and mortgage markets for the upcoming new year. Number nine on our list of “10 thoughts for 2013” was “Fed policy: Operation Twist ends, something new starts.”

That prediction came early. At the conclusion of the last Federal Open Market Committee (FOMC) meeting in 2012, the Fed did in fact announce that Operation Twist will sunset at the end of the month as originally planned, and the policy-setting group also announced a new effort to keep mortgage rates low and improve the economy as a whole.

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Below is an excerpt from the latest Market Trends newsletter. Sign up and receive it in your inbox Friday evening:

Economic growth was stronger in the third quarter than the second, a welcome pickup from a truly poor period. Despite the increase, there’s no present indication that any Fed policies supporting the economy will be removed anytime soon, or that we are poised to have an economy running at a quickened pace.

The Fed’s effort to manipulate mortgage rates has so far has resulted in little more than an eighth-percentage point decline in rates. However, the Fed is in some ways fighting to keep rates low against the hoped-for outcome of its extraordinary monetary policy — a stronger economy. As such, rates are caught in a bit of a tug-of-war. Read the rest of this entry »

A continuing stream of largely better economic data has helped mortgage rates to firm a little in recent weeks, but they wandered a bit backward last week.

There’s really no place for them to go at the moment, not with the Federal Reserve’s QE3 program fully underway. That said, it is interesting that the Fed’s program to keep mortgage rates low must in some ways fight against the ultimate goal of the program, which is to foster stronger economic growth; stronger growth tends to push interest rates higher. Read the rest of this entry »

Below is an excerpt from the latest Market Trends newsletter, available Friday night in your inbox.

Even though some of the economic news was a little warmer last week, mortgage rates continued their downward drive. However, the decline last week was more muted than the previous week, and with the cumulative benefit of the Fed’s QE3 program closing in on a quarter-percentage point, we may not have all that much room for rates to fall at the moment.

Mortgage rates still setting records

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We speculated at the end of last week that the August employment report would be a deciding factor in whether or not the Fed would decide to react following their two-day meeting which concluded on Thursday.

From our weekly Market Trends newsletter: Read the rest of this entry »

The Federal Reserve kicked off its new strategy of clearer communications at the close of January’s Open Market Committee meeting last Wednesday afternoon. With just a few words, plus some charts (page 3), the Fed now expects to keep interest rates “extraordinarily low” for a period up to 18 months longer than the mid-2013 estimate previously in place. Also for the first time, the Fed officially revealed more explicitly that it will use an inflation target to help control monetary policy.

The Fed’s influence on mortgage rates

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