No Federal Rate Change- What This Means To You

Federal Reserve Chairman spoke loudly today- by saying little at all. The Federal Open Market Committee decided to leave the Federal Funds Rate  (the index upon which prime is affixed) at 5.25%, the same since last June. As you are probably hearing, the DOW responded in kind by finishing the day up 159.4 points. So what does this mean to you?

Despite what you may be thinking, the Federal Reserve's decision not to raise rates is actually a good thing. This accomplishes two things- first, it stems any talk of a recession or a slowdown in economic growth. Typically, when the market begins to bottom out or the possibility of a recession appears, the Federal Reserve will step in and lower interest rates to curb recession possibilites and keep a strong market. By not raising them, the Federal Reserve sends a strong signal to investors that it is not overly concerned about recession talk and expects mild to moderate growth. That's good for the economy and ultimately good for your pocketbook.

Secondly, in regards to mortgage interest rates, this continues a trend of predictability with interest rates so that you, the buyer needs not worry about trying to time your purchase with a dip in interest rates. Ultimately, I believe we will see the Fed lower interest rates, but I don't see that happening until fall, when we get through another summer of slow housing sales and the government trys to kick start home purchases in time for a strong fourth quarter.