Industry News
Mortgage Industry News
Little Change in Rates
09/09/2011
This week’s economic news contained few surprises. Fed Chief Bernanke gave no indication of policy changes and President Obama’s jobs package matched expectations. As a result, mortgage rates ended the week with little change, remaining at historically low levels.
The basic issue confronting the US economy is slow economic growth with high unemployment. Both Fed officials and lawmakers would like to boost economic growth, but the challenge is figuring out how to accomplish this. Thursday, Fed Chief Bernanke stated that the Fed will consider additional stimulus at its next meeting on September 21, but he gave no indication whether the Fed will take action. The consensus view is that additional monetary stimulus from the Fed would have a limited impact on the economy. Fed officials are deeply divided about whether to ease policy to help as much as possible or whether the negative consequences in terms of higher future inflation and financial market distortions are too high a price to pay. This week alone, two Fed officials publicly stated that monetary policy has little ability to help the job market under current economic conditions, while another official came out strongly in favor of additional monetary stimulus to lower the unemployment rate. In any case, the next Fed meeting may be a very significant event for mortgage rates.
Lawmakers are also faced with the difficult task of weighing the costs and the benefits of different programs to lift the economy. On Thursday, President Obama proposed a $447 billion package of tax cuts and new spending to stimulate the economy and create jobs. The debate next moves to Congress. The government has spent an enormous amount of money over the last few years on stimulus programs, and analysts disagree about their effectiveness. Given the high level of government debt, there is greater resistance now to spending more money for uncertain results.
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