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Fed Expected To Maintain Asset Purchase Policy This Week

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WASHINGTON (7/30/13)--Fed policymakers meeting today and Wednesday are expected to stay the course on monetary policy, which means no change is expected in either the federal target funds rate or the Fed's quantitative easing (QE3) policy of buying bond assets (Bloomberg.com).
 
The Federal Open Market Committee (FOMC), the Federal Reserve's monetary policymaking body, probably will maintain its benchmark federal funds interest rate at 0.25% when it makes its statement on Wednesday, according to economists surveyed by Bloomberg.  Economists also predict that the FOMC won't begin to reduce its $85 billion a month bond purchasing program, dubbed QE3, until September.
 
The Fed said after its last meeting that economic data--namely the unemployment rate and the inflation rate--will determine when it moves its forward guidance on interest or its asset purchases policy.
 
This week's meeting is the last FOMC meeting before September, the month many economists expect the Fed to announce it is tapering off the bond asset purchasing program.
 
Although no changes are predicted in this week's policy, the FOMC's commentary on the state of the economy could be significant, said Brian Gardner, senior vice president of Washington Research at Keefe, Bruyett & Woods. Any change in the committee's description of the economy may yield clues about when the tapering process will begin, he told MoneyMorning.com. (July 29).

Pending House Sales Decline While Home Price Index Rises

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WASHINGTON (7/30/13)--Fewer Americans signed contracts to buy existing homes in June, an indication that the rising prices in the mortgage market are beginning to affect the housing market, according to the National Association of Realtors (Bloomberg.com. and Moody's Economy.com July 29).
 
The Pending Home Sales Index declined  0.4% to 110.9,  seasonally adjusted,  in June after climbing in May to the index's highest level since December 2006.  The median forecast of 40 economists surveyed by Bloomberg was for a 1% decline.  However, the index is still up 10.9% from its level in June 2012, with the housing recovery is still on track, said Bloomberg.
 
The South recorded the largest decline, falling 2.1% from May, and the Midwest declined 1%. The Northeast recorded no change from the previous month, and the West was the only region to mark increasing sales, which were up 3.3% from May, said Moody's.
 
Moody's noted that an improving employment market, strong investor demand and increasing confidence among homebuyers will "outweigh the negative impact of higher interest rates in coming quarters."