Wednesday, June 20, 2012

Fed Weighs Move to Take Mortgage Rates Even Lower

The Federal Reserve’s policy-making committee meets today and Wednesday to decide whether the economy could use another boost. Threats from the ongoing debt crisis in Europe, a dismal U.S. job report in May, low inflation, and dropping consumer prices has shaken the U.S.’s economic recovery in recent weeks. Some analysts speculate that the Fed will decide at its policy meeting to extend Operation Twist, a plan in which the Fed has sold short-term securities in order to buy up longer-term bonds in an effort to reduce long-term interest rates. The move has set out to increase borrowing and spending. Operation Twist is set to expire in two weeks. Some analysts expect the Fed will decide to extend Operation Twist and try to lower already record-low mortgage rates even more to help lift the housing market, the Associated Press reports. But others are skeptical that lowering rates any more would provide much boost to the economy. The lower rates may not provide any more motivation for consumers to act, they say, and those who have not been able to qualify for more stringent lending standards in recent years will still be shut out. "I think Fed officials will send a pretty decisive signal that they are prepared to provide more support to boost economic growth and lower unemployment," Brian Bethune, economics professor at Gordon College in Massachusetts, told the Associated Press. Source: “As Fed Holds Policy Meeting, Many Await Possible Action to try to Lower Rates and Aid Economy,” The Associated Press (June 19, 2012) and “With Risks for Growth Still Hazy, Fed to Weigh New Aid,” The New York Times (June 18, 2012)

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