The Value of Our Partners – an Interpretation of the Fed Press Release
Another benefit of being a Broker is that we have resources beyond our own. Our lender partners spend way more money than we ever would on things like legal research, program analysis and market predictions. Here’s one such example of the value of our Partners – an interpretation of the Fed Press Release
The Fed frequently publishes it’s discussion on the market and their likely pursuit of policy. This is important because the policy actually dictates short term interest rates. Additionally they are currently artificially keeping bond and long term rates low. This directly affects our industry as well as the market at large. In other words, what they say is pretty important. The hard part is it’s nearly impossible for the layperson to figure out what they are actually saying.
Check this out. One of our Lender Partners has a legal / fiscal team that does an analysis of the Fed notes and does it in a cool way. This is just another way in which we can continue to be valuable for you. If you’d like to read it, I’ve embedded a portion of the text below.
If you’d like to learn more about the what the insiders think about upcoming rates, or a full copy of this text, simply shoot me a quick email and let me know.
Fed Mumbo Jumbo Interpretor
–Here’s a portion of that text below
For immediate release
Information received since the Federal Open Market Committee met in March indicates that growth in economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions. Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated. Household spending appears to be rising more quickly. Business fixed investment edged down, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.
The Federal Open Market Committee (FOMC) is a group of dudes and dudettes that are chosen from one of the 12 Federal Reserve Banks across our great land. This committee of fun loving economists are the ones who meet 8 times a year to decide how much fuel to put in the US economy’s tank. If they want to speed up the economy – they put more fuel (money) in. If they want to slow it down – they pull out a squeegee and suck fuel (money) out of the tank.
In the paragraph above, the Fedsters tell us that the economy is slooooowly getting better. Unemployment is still too high. People seem to be spending more. They also blame the government (“Fiscal policy is restraining economic growth…”) It’s always amusing to watch one government employee blame another…
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually, moving toward those the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as nearly balanced. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.
This is the paragraph where the Fed tells us what their job description is. They try to keep people employed while not causing inflation. And they also remind us that they want prices to rise by 2% a year. Why you ask? Good question you….. (email me if you’d like a copy of the rest of the analysis)