Susan Walsh, ASSOCIATED PRESS
Another meeting of the Federal Reserve Board has come and gone. One of the most followed actions of the Fed was the decision not to begin the generally anticipated tapering of the current monthly purchases of U.S. Treasury securities and residential mortgage-backed securities.
With monthly Treasury note and mortgage-backed securities purchases by the Federal Reserve totaling $85 billion, the board determined the U.S. economy was not sufficiently strong to warrant a decrease in these purchases. Ongoing purchases are intended to maintain or potentially lower longer-term U.S. interest rates.
With interest rates in the five- to 30-year maturities increasing slightly over the past several months, origination of new residential mortgages has slowed somewhat, due in part to the increase in borrowing costs. The current rate on the 10-year maturity U.S. Treasury note is approximately 2.75 percent. Many traditional residential mortgage rates track the movement of the rate on the 10-year U.S. Treasury note. On a historic basis, current residential mortgage rates still remain very attractive.
With a potentially diminishing supply of new residential mortgages being originated, the ongoing purchases by the Fed should have a proportionally more significant effect on mortgage borrowing rates. The mix of the U.S. Treasury notes and residential mortgage-backed securities purchased by the Fed is not explicitly communicated to the public.
Members of the Federal Reserve Board are appointed by the U.S. president and are confirmed by the Senate. Once they are appointed, they are expected to make monetary policy decisions independent of political pressures and motivations. Members serve a 14-year term. Some members have served a remaining portion of another member’s term before being appointed to serve their own full terms.
The composition of the Fed Board and the charter of the board allow it to take a longer-term perspective on the health and direction of the U.S. economy. Fed announcements continue to indicate interest rate policy will be driven by the data describing the status of the economy.
Given the positive, although somewhat tepid, growth of the U.S. economy, near-term Fed actions will most likely be measured and cautious. Policy changes will occur, although the timing and severity will continue to be topics of speculation for many market participants.
Kirby Brown is the CEO of Beneficial Financial Group in Salt Lake City.
- Utah's first family of rodeo: Riding buckin'...
- Men and women: Understanding the wage gap is...
- Dave Ramsey says: You can have a wedding...
- Students hope to invent windows of the future
- Everything you need to know about year-end...
- Recruiting crisis? UHP, other agencies...
- From world-class soldier to world-class...
- David Sturt and Todd Nordstrom: Don't forget...
- Men and women: Understanding the wage... 34
- The new Thanksgiving tradition: A quick... 11
- Clinton proposes $275 billion in new... 9
- Recruiting crisis? UHP, other agencies... 7
- Obama shops at Washington bookstore,... 5
- How to avoid scams on Cyber Monday and... 4
- Utahns urged to shift spending during... 4
- Utah's first family of rodeo: Riding... 2