WASHINGTON (8/22/13)--Nearly all members of the Federal Reserve's monetary policymaking body confirmed they were "broadly comfortable" with Fed Chairman Ben Bernanke's plan to start winding down its bond-buying program later this year if the economy improves, said the minutes of the Federal Open Market Committee's (FOMC) July 30-31 meeting.
The minutes, released Wednesday afternoon, left unclear exactly when the reduction of the quantitative easing program would start. The FOMC does not have an August or a November meeting, which means the committee would have three chances--in September, October, or December--to start the wind-down of the $85 billion per month bond buying program during this calendar year.
Of 48 economists surveyed by Bloomberg.com, 65% believe the FOMC will probably start the reduction in September. The median estimate calls for the program to be reduced to $75 billion a month (Bloomberg.com Aug. 21).
While a range of views were expressed at the FOMC's meeting, "almost all committee members agreed that a change in the purchase program was not yet appropriate." A few members "emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases," said the minutes.
Committee members agreed "with the characterization of the contingent outlook for asset purchases that was presented" in June and July, in which the committee would moderate the pace of its securities purchases later this year. "If economic conditions continued to develop broadly as anticipated, the committee would reduce the pace of purchases in measurer steps and conclude the purchase program around the middle of 2014," said the minutes.
The committee discussed when to include additional information about its contingent outlook for asset purchases. Most saw the new information as "potentially useful; however, many also saw possible difficulties," while several "saw other forms of communication as better suited for this purpose."
FOMC members also addressed whether to change current numerical thresholds in forward guidance for interest rates. Some believed that lowering the unemployment threshold could potentially lead the public to view that the threshold could be moved both down and up, which would undermine their effectiveness, the minutes said.
The committee also considered a new tool for managing interest rates--a fixed-rate, full-allotment overnight reverse purchase agreement facility as an additional tool for managing money market interest rates. Use the link to access the full FOMC Minutes.
WASHINGTON (8/22/13)--U.S. existing-home sales rose strongly in July, with the median price maintaining double-digit year-over-year increases, according to the National Association of Realtors (NAR).
Total existing-home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--increased 6.5% to a seasonally adjusted annual rate of 5.39 million in July from a downwardly revised 5.06 million in June. July's sales are 17.2% above the 4.60 million-unit pace in July 2012. Sales have remained above year-ago levels for 25 months.
Lawrence Yun, NAR chief economist, said changes in affordability are impacting the market. "Mortgage interest rates are at the highest level in two years, pushing some buyers off the sidelines," he said. "The initial rise in interest rates provided strong incentive for closing deals. However, further rate increases will diminish the pool of eligible buyers."
Despite higher mortgage interest rates, Yun identified compensating factors that can sustain a continued recovery. "Although housing affordability conditions will become less attractive, jobs are being added to the economy, and mortgage underwriting standards should normalize over time from current stringent conditions as default rates fall," he explained.
To read the NAR release, use the link.