FHFA House Price Index Rises for 14th Consecutive Quarter

According to the Federal Housing Finance Agency (FHFA), U.S. home prices rose by 1.40 percent for the fourth quarter of 2014 and were up by 0.80 percent month-to-month from November. The seasonally adjusted FHFA House Price Index measures purchase transactions for homes connected with mortgages owned by Fannie Mae and Freddie Mac.

FHFA also reported that home prices rose 4.9 percent year-over –year from the fourth quarter of 2013 to the fourth quarter of 2014. FHFA Chief Economist Andrew Leventis described the report for the last quarter of 2014 as "relatively strong" and also cited low inventories of available homes and improving labor markets as contributing to home price growth.

FHFA House Price Index Identifies Significant Trends

FHFA's expanded house price data, which adds data from county records and the Federal Housing Administration, to the FHFA House Price Index, indicated that home prices grew by 1.30 percent in the fourth quarter; year-over-year home prices grew by 6.0 percent according to FHFA's expanded house price data report.

According to purchase-only indexes for the 100 most populated metro areas, the San Francisco-Redwood City-south San Francisco, California metro area posted the highest rate of year-over-year home price gains at six percent for the fourth quarter of 2015. The lowest reading was for the El Paso, Texas, which posted a loss of 6.60 percent in the fourth quarter.

The mountain division of the nine U.S. Census divisions posted the highest annual home price growth at 5.50 percent and 1.40 percent in the fourth quarter. House price appreciation was weakest in the New England Division, where home prices fell by0.03 percent.

FHFA also reported that its "distress free" home price indexes which the agency publishes for 12 metro areas have shown less price appreciation than the FHFA purchase only Home Price Index. Distress-free means that foreclosed homes and short sales were not included in these index readings.

FHFA has expanded its home price reports with a set of reports based on three-digit zip codes. Sorting house price data by the first three digits of a zip code provides more specific data for regional home price trends; mortgage and real estate pros can find house price data for specific neighborhoods and communities. FHFA described its three-digit zip code reports as "experimental" at present.

 

Fed Not in a Hurry to Raise Rates: FOMC Meeting Minutes

Minutes of the Federal Open Market Committee (FOMC) meeting held January 27 and 28 were released on Wednesday. According to the minute's transcript, it appears that Fed policymakers are in no hurry to raise the target federal funds rate. Members said that raising rates too soon could swamp the strengthening economy and expressed concerns that changing the committee's current "patient" stance on rising rates could cause more harm than good to current economic conditions.

FOMC members discussed the Fed's use of the word "patient" in its guidance, and said that dropping the word could incorrectly suggest that the Fed is planning to act sooner than later on raising the Fed's target interest rates, and could result in "undesirably tight" financial conditions. While a majority of members agreed on protecting current economic conditions by raising rates too soon, member viewpoints varied on which conditions would support the first rate hike.

Target Inflation Rate of Two Percent "Most Consistent" with Fed's Statutory Mandate

According to the Federal Reserve's statutory mandate supplied by Congress, the Fed seeks to provide maximum employment, price stability and moderate long-term interest rates. The Fed established a target inflation rate of 2.00percent as a benchmark for economic health, but inflation has remained consistently below the target rate according to the annualized index reading for personal consumption expenditures.

FOMC members did not set a target rate for annual unemployment; FOMC members cited unpredictable "non-monetary factors that affect the structure and dynamics of the labor market" as reasons why it's impossible establish an accurate target percentage rate for national unemployment. The minutes caution that these factors are sufficiently unpredictable that they may cause the Fed to revise or reverse its policies concerning national unemployment readings.

Committee members noted that short-term fluctuations in the federal funds rate could be expected. The minutes indicated that in general, day-to-day fluctuations outside of the Fed's target range were not surprising as historical data indicated that such changes had "few if any implications for overall financial conditions or the aggregate economy."

FOMC members agreed that the economy had expanded at a solid pace, but noted that inflation had fallen due to rapid decreases in fuel prices.

Fed/FOMC Chair Janet Yellen did not hold a post-meeting press conference at the conclusion of January's FOMC meeting; she is scheduled to hold a press conference at the conclusion of the next FOMC meeting on March 18, 2015.

What's Ahead For Mortgage Rates This Week - February 16, 2015

Last week's economic news included an index of labor market conditions provided by the Federal Reserve, a report on small business sentiment, and a report from the Labor Department on job openings. Weekly jobless claims, Freddie Mac's mortgage rates report and a report on Consumer Sentiment rounded out the week. The details:

Labor Market Conditions, Small Business Index Reports Fall

According to the January reading for a labor index report released by the Federal Reserve, labor market conditions declined from December's reading of 7.3 to January's reading of 4.9. This index is based on 19 economic indicators and January's reading was the lowest since September. The National Foundation for Independent Business (NFIB) reported that its index of small business sentiment fell to 97.9 in January as compared to December's reading of 100.4. Analysts said that this report reflected less optimism about business conditions and sales growth rather than concerns over spending and hiring plans.

In other labor–related news, the Labor Department reported that job openings rose to 5.03 million in December; this was 3.70 percent higher than November's reading and represented a year-over-year increase in job openings of 28.50 percent. In contrast, all hiring for 2014 increased by 12.50 percent, which suggested that employers may be having trouble finding employees with needed job skills.

Jobless Claims Rise, but Four Week Average Shows Drop in New Claims

According to the Labor Department's weekly Jobless Claims report, 304,000 new unemployment claims were filed, which once again positioned new jobless claims over the key benchmark of 300,000 new jobless claims filed. Analysts expected a reading of 296,000 new jobless claims based on the prior week's reading of 279,000 new claims. To put this in perspective, new jobless claims have fallen by 3250 claims over the past four weeks to a reading of 289,750 new claims. Economists say that the four-week average is a more accurate measure of developing trends, as week-to-week readings can be volatile.

Mortgage Rates Rise

Last week's only scheduled mortgage-related news was Freddie Mac's weekly survey of average U.S. mortgage rates. Rates were higher with the average rate for a 30 year fixed rate mortgage higher by 10 basis points at 3.60 percent. The average rate for a 15-year fixed rate mortgage rose by eight basis points to 2.99 percent. The average rate for a 5/1 adjustable rate mortgage jumped to 2.97 percent from the previous week's average of 2.82 percent. Average discount points were 0.60 percent for 30 and 15-year fixed rate mortgages and averaged 0.50percent for a 5/1 adjustable rate mortgage.

February's Consumer Sentiment Index dipped as fears of rising inflation caused consumer sentiment to dip from January's reading of 98.1 and expectations of February's reading at 98.5; unfortunately, February's actual reading fell short at 93.6. February's reading was a three-month low after January's reading hit an 11-year high. Fears of growing inflation were noted as an influence on the drop in consumer sentiment; fuel prices are rising, which will contribute to rising inflation.

What's Ahead

No economic reports were scheduled Monday due to the President's Day holiday. The National Association of Home Builders (NAHB) releases its housing market index report on Tuesday, Housing Starts will be released Wednesday along with the minutes of the most recent FOMC meeting. Weekly jobless claims, Freddie Mac's mortgage rates survey and Leading Economic Indicators round out this week's scheduled reports.

What's Ahead For Mortgage Rates This Week - Feburary 9, 2015

Last week's economic news included construction spending, which fell shy of expectations but exceeded the prior month's spending, and several consumer and labor-related reports. The details:

Mortgages More Accessible: Fed Survey

A Federal Reserve survey of senior loan officers at 73 U.S. banks and 23 branches of foreign banks indicated that mortgages may be more accessible. While banks eased credit standards for mortgages eligible for purchase by Fannie Mae and Freddie Mac, consumer demand for mortgages fell over the last three months. This seems puzzling given lower mortgage rates, but mortgage lending rules remain tough for borrowers with less than pristine credit.

Mortgage rates dropped last week according to Freddie Mac. The average rate for a 30-year fixed rate mortgage was 3.59 percent with discount points higher at 0.70 percent. The average rate for a 15-year fixed rate mortgage was seven basis points lower at 2.92 percent with discount points higher at 0.60 percent. The average rate for a 5/1 adjustable rate mortgage was four basis points lower at 2.82 percent with discount points unchanged at 0.40 percent.

Lower mortgage rates are great news for home buyers and homeowners seeking to refinance, but only if mortgage loans are available.

Construction Spending Higher, Consumer Spending Drops, Inflation Stalls

According to the Department of Commerce, Construction Spending rose by 0.40 percent in December against November's reading of -0.20 percent and expectations of 0.70 percent growth. December's reading represented $981.2 billion in construction spending on a seasonally-adjusted annual basis. Residential construction rose by 0.30 percent.

Consumer spending fell by -0.30 percent and was consistent with analysts' expectations. This was the highest month-to-month drop in consumer spending since September 2009. Consumers spent less on vehicles and fuel. Lower fuel prices were seen as the driving force behind less consumer spending. Core personal expenditures did not increase in December. Core inflation, which excludes volatile food and energy sectors, was well below the Fed's target annual inflation rate of 2.00 percent with a reading of 1.30 percent year-over-year.

Labor Reports: Mixed Signals

Weekly jobless claims rose to 278,000 against the prior week's reading of 267,000 new jobless claims, but claims were lower than the expected reading of 290,000 new jobless claims. Nonfarm payrolls for January were higher in January at 257,000 jobs added. Analysts expected only 230,000 new jobs added in January based on December's reading of 267,000 jobs added.

ADP Payrolls reported 213,000 private sector jobs added in January against December's reading of 253,000 private sector jobs added. January's lower reading is likely based on seasonal hiring during the holiday season. National Unemployment rose from December's reading of 5.60 percent to 5.70 percent. In recent months national unemployment rates have fallen below the Fed's target reading of 6.50 percent.

What's Ahead

This week's scheduled economic reports include data on retail sales, job openings, labor market conditions and weekly reports on new jobless claims and Freddie Mac's survey of mortgage rates.

 

FOMC Statement: No Year-End Surprises

The Federal Open Market Committee (FOMC) said in its last statement for 2014 that although economic conditions have improved at a moderate pace, the Fed believes that the target federal funds rate of between 0.00 and 0.25 percent remains "appropriate." While labor markets show expanding job growth and lower unemployment rates, FOMC members noted that housing markets are recovering slowly.

Inflation remains below the committee's target rate of two percent; this was attributed to lower fuel costs. Household income and business investment were seen as increasing, and the underutilization of workforce resources was described as "diminishing." These developments indicate better economic conditions for consumers, business and job seekers, as employers picked up the pace of hiring.

Target Fed Funds Rate Unchanged

No year-end changes in monetary policy were made; the Fed issued its usual statement that developing economic conditions would guide the Committee's decisions concerning the target federal funds rate. The FOMC statement said that changes could be made according to progress toward or away from achieving the Fed's dual mandate of maximum employment and price stability. No specific date was given for raising the target federal funds rate. The FOMC statement noted that no change is likely as long as the inflation rate remains below the Fed's longer-term target of two percent.

The FOMC statement was followed by a press conference given by Janet Yellen, fed chair and Chair of the FOMC. 

Fed Chair: Oil Price Influence on Inflation "Transitory" 

Janet Yellen, chair of the Federal Reserve and FOMC, said that she expects lower oil prices to be a transitory influence on inflation, which continues to run lower than the Fed's target rate of two percent. Media representatives noted that Chair Yellen replaced the phrase "considerable time" with "patient" in reference to when the Fed might raise the target federal funds rate.

Ms. Yellen said that the gross domestic product (GDP) had increased by 2.50 percent over the prior four quarters ending with the third quarter of 2014, and said that the economy continues to grow at approximately the same pace. Concerning falling inflation, Ms. Yellen said that she expected the inflation rate to increase after transitory influences including oil prices dissipate. The Fed Chair said that she perceived lower oil prices to be a positive development for the U.S. economy on net.

In response to questions about when the Fed would raise the target federal funds rate, Chair Yellen said that it would likely occur sometime in 2015 and also mentioned "sometime after the next couple of FOMC meetings. This suggests that mid 2015 may bring a change, but Ms. Yellen repeated the Fed's oft-stated position that continual review of economic conditions and developing trends would impact any decision to change or not change the federal funds rate.

Federal Open Market Committee, Fed Chair: No Rush to Raise Rates

Wednesday's customary post-meeting statement issued by the Federal Open Market Committee (FOMC) of the Federal Reserve provided some relief to investors and analysts concerned that the Fed may soon raise its target federal funds rate. The target federal funds rate has held steady at between 0.00 and 0.25 percent since the inception of the Fed's current quantitative easing program. The FOMC statement indicated that the committee does not expect to raise the target federal funds rate until the Fed's dual mandate of maximum employment and reaching its target inflation rate is achieved.

FOMC members don't expect the wind-down of scheduled securities purchases under the quantitative easing program to cause long-term interest rates to rise quickly. The FOMC statement indicates that the Fed expects its current holdings and acquisitions of securities to hold down long-term interest rates and help with achieving the Fed's dual mandate of achieving maximum employment and 2.00 percent inflation. As in past meetings, the FOMC statement asserted the committee's dedication to reading and researching economic and financial reports and repeated that Fed policy is not contingent on a predetermined course, but that FOMC members make decisions based on current economic trends and developing domestic and global events.

FOMC members also re-asserted their position that after employment and inflation achieve levels consistent with the Fed's dual mandate, the Fed will likely maintain the target federal funds rate at lower levels than the committee considers normal for "some time."

Fed Chair Janet Yellen provided further insight into Fed policy during a press conference given after the FOMC statement. She also said that the FOMC's view of current economic conditions has not changed over the past few months. Chair Yellen also said that the committee expects to maintain the current target federal funds rate for a "considerable time" after asset purchases under the QE 3 program cease.

Fed Chair Yellen: Gaps Between Current Data and Fed's Mandate Shrink Modestly

In a press conference given after the FOMC policy statement was released, Fed Chair Janet Yellen emphasized that the committee's discussions did not imply any near-term changes to the target federal funds rate. Chair Yellen cited gaps between current unemployment rates and the Fed's mandate of achieving maximum employment and the current inflation rate and the Fed's target inflation rate of 2.00 percent as major considerations in forming current Fed policy. She said that the respective gaps had narrowed "modestly," and again emphasized the Fed's commitment to constant review of economic and financial data as a significant factor in its decisions to change monetary policy.

Ms. Yellen cautioned media representatives and analysts to avoid making economic projections too far into the future and pointed out that longer term predictions are subject to more variables. Chair Yellen also cautioned press conference attendees not to consider anything in the FOMC statement or her press conference to a definite time frame.

Media reps continued to press for definite dates and time projections, but Chair Yellen held fast to the Fed's often-repeated position that policy changes cannot be set by a calendar and also depend on economic trends and news that influence the Fed's monetary policies.

What's Ahead For Mortgage Rates This Week - Aug 11, 2014

Last week's housing related news was minimal, but a Federal Reserve survey of senior loan officers revealed that although credit standards for commercial and industrial loans as well as credit cards are easing, current mortgage credit standards are more stringent than in 2005. This could be a contributing factor to slowing housing market gains while other sectors of the economy are recovering at a faster pace.

Qualified Mortgage Rules Impact Non-Conforming Mortgages

The Senior Loan Officers survey also noted that qualified mortgage rules have slowed approval of prime jumbo mortgages and non-traditional home loans. This suggests that applicants falling outside of stringent qualified mortgage rules can expect challenges when buying or refinancing their homes.

In other housing news, Freddie Mac's Primary Mortgage Market Survey reported that last week's mortgage rates were mixed. Mortgage rates for a 30-year fixed rate mortgage averaged 4.14 percent with discount points of 0.70 percent against last week's reading of 4.12 percent with discount points of 0.60 percent. 15-year mortgage rates averaged 3.27 percent with discount points of 0.60 percent. This was an increase of four basis points, although discount points fell from 0.70 percent to 0.60 percent. The average rate for a 5/1 adjustable rate mortgage was 2.98 percent, a drop of two basis points, with discount points unchanged at 0.50 percent.

Fewer Jobless Claims, Service-Related Business Growth Exceeds Expectations 

The weekly Jobless Claims report brought a lower than expected reading of 289,000 new claims as compared to predictions of 305,000 new jobless claims. In other economic news, the Institute for Service Management (ISM) reported that its non-manufacturing index rose from June's reading of 56.00 percent to 58.70 percent in July. Analysts had forecasted July's reading at 56.50 percent. July's reading represented the highest growth rate for service-related businesses since 2005.

According to the Department of Commerce, June factory orders rose by 1.10 percent over May's reading of -0.60 percent against an expected reading of 0.60 percent. As business expands and factory orders increase, it's likely that jobs and hiring will also grow. Steady employment is a compelling factor for most home buyers and positive reports in labor and industrial sectors could boost housing markets as more buyers increase demand for homes.

What's Ahead

Next week's economic reports include retail sales, retail sales excluding automotive, industrial production and the weekly reports on mortgage rates and new jobless claims. While there isn't much housing news expected next week, readings in other economic sectors can suggest potential trends in housing markets

FOMC Minutes: Committee Discusses "Normalizing" Policy

April's meeting of the Fed's Federal Open Market Committee was held along with the Board of Governors of the Federal Reserve System.

Meeting minutes released Wednesday indicated the committee's interest in "normalizing" its monetary policy. This included the FOMC's ongoing commitment to tapering its asset purchases under its quantitative easing program.

The committee agreed to taper the Fed's monthly asset purchases by $10 billion to $45 billion per month. Committee members discussed raising the target federal funds rate, which now stands at 0.00 to 0.25 percent, but the minutes clearly stated that this topic was undertaken as part of "prudent planning, and did not indicate that normalization would necessarily begin sometime soon."

The FOMC minutes reflected the committee's concern with achieving a balance between normalizing the Fed's monetary policy and keeping short-term interest rates under control.

Meeting attendees considered methods for managing interest rates and considered potential impact of each method discussed on overall financial stability.

Importance Of Early Communication

Meeting participants discussed the importance of early communication of pending changes to the Fed's monetary policy, and agreed that advising the public "well before the first steps in normalizing policy become appropriate."

Early communication to the public of planned changes was viewed as a means of providing clarity and credibility to FOMC policy decisions and help FOMC achieve its statutory goals of maximum employment, stable pricing and moderate long term interest rates.

Potential Impact Of Achieving Normalcy

 FOMC members discussed the possible impact of tools considered for use in normalizing the economy on the following:

• Fed control over short-term interest rates
• The Fed's balance sheet and Treasury remittances
• Functionality of Federal Funds Market
• Financial stability in normal times and times of stress

The minutes noted that the Fed has never used any of the methods discussed while the Fed held a large balance sheet, and recommended that flexibility in using tools for achieving normal fiscal policy.

No decision was made about normalizing current monetary policy; FOMC and Fed Board members agreed that further study and analysis were needed before any decisions would be made.

Fed: Mortgage And Refinance Applications "Tepid"

The FOMC minutes characterized the level of mortgage and refinance applications through March as tepid, due to increasing mortgage rates and home prices.

While a survey of senior loan officers revealed that mortgage credit had been loosened for applicants with prime credit, mortgage credit remained tight for those with less than excellent credit.

The unemployment rate held steady at 6.70 percent and remained above the FOMC's benchmark of 6.50 percent. There was some good news as the workforce expanded and the ranks of the long-term unemployed decreased.

Stable employment is important to potential home buyers; if unemployment levels continue to fall, numbers of home buyers are likely to increase.

What's Ahead For Mortgage Rates This Week - May 27, 2014

Last week's economic news was dominated by speeches given by Federal Reserve presidents, the minutes from April's FOMC meeting and commencement address given by Fed Chair Janet Yellen. The latest readings for new and existing home sales were also released.

Federal Reserve Speeches Suggest Concerns Over Monetary Policy Dependence, Low Inflation

Here are highlights of comments made by each of the Fed presidents' speeches. Richard Fisher, president of the Dallas Fed, and John Williams, President of the San Francisco Fed, spoke at a conference held at the Bush Institute.

Mr. Fisher said that 98 percent of jobs lost during the recession had been recovered, and that other jobs had been added. He also cited "bad fiscal policies," and said he is worried about dependence on the Fed's monetary policy when "Congress and the Executive Branch have put on the brakes." 

John Williams, president of the San Francisco Fed, said that he was concerned about slowing momentum in housing markets, although he noted that housing had driven economic recovery in the aftermath of the recession.

The inflation rate has remained well below the Federal Reserve's target rate of 2.00 percent, and Mr. Williams said that the Fed is paying close attention to this. His remarks were supported in Wednesday's release of the FOMC minutes of its April meeting.

Charles Plosser, the Philadelphia Fed's president, took an optimistic tone at a speech given before the Women in Housing Foundation on Tuesday. He said that the national unemployment rate could fall below 6.00 percent by the end of 2014 and that he expects the housing market to bounce back as well.

This makes sense, as strong labor markets are known to influence consumer decisions to buy a home.

New York Fed President William Dudley spoke before the New York Association for Business Economics, and said that there would be "a considerable period of time" between when the current asset purchase program ends and the first Fed rate hike would occur.

He also indicated that he expected longer-term interest rates (which include mortgage rates) to be "well below" a historical average of 4.25 percent.

Minneapolis Fed President Narayana Kocherlakota said that the Fed should consider targeting price levels rather than the current policy of targeting the inflation rate. He said that this was not likely to occur any time soon, but noted that current Fed policy is "undershooting" the central bank's goals for unemployment and inflation.

Fed Chair Janet Yellen cited her predecessor, Ben Bernanke as a positive example when she spoke at New York University's commencement. She noted that he took "courageous actions unprecedented in ambition and scope" and that his "grit willingness to take a stand" had directed his decisions during the recession.

Mortgage Rates Down, Existing Home Sales Up

Freddie Mac reported that average mortgage rates dropped last week. The average rate for a 30-year fixed rate mortgage fell to 4.14 percent, a drop of six basis points. The rate for a 15-year fixed rate mortgage fell by four basis points to 3.25 percent.

The average rate for a 5/1 adjustable rate mortgage dropped by five basis points to 2.96 percent. Discounts were unchanged at 0.60 percent for 30-year mortgages and 0.40 for 5/1 adjustable rate mortgages, but dropped to 0.50 percent for 15-year mortgages.

Sales of existing homes rose to their highest level in four months according to the NAR. Month-to-month sales of previously-owned homes rose by 1.63 percent in April to a seasonally adjusted annual rate of 4.65 million sales as compared to March's reading of 4.59 million sales. This was the first rise in sales of existing homes in 2014, and nearly met expectations of 4.66 million sales.

This Week

After the Memorial Day holiday, this week's economic news includes the Case-Shiller Home Price Index, FHFA's house price index and consumer confidence index.

Pending home sales, jobless claims and Freddie Mac's mortgage rates report along with the University of Michigan consumer sentiment index round out the week's scheduled events.

Fed Minutes Predicts Tapering Of Quantitative Easing Program

Housing Starts exceeded expectations and also beat October's reading of 889,000. November housing starts were posted at 1.09 million against a consensus of 963,000.

This reading is more in line with the NAHB/Wells Fargo Home builder Market Index, which reached a four month high with December's reading.

With that threat resolved and a new federal budget passed, builders can now proceed without worrying about setbacks caused by government shutdowns and legislative gridlock.

Building permits issued in November were slightly lower at 1.01 million than October's reading of 1.04 million. Viewed as an indicator of future construction, and ultimately, available homes, it is not unusual for construction and permits to slow during the winter months.

FOMC Statement And Chairman Bernanke's Last Press Conference

Throughout 2013, strong signs of economic recovery have led to predictions of the Federal Reserve tapering its quantitative easing program.

As each FOMC meeting approached, analysts predicted that the Fed would start reducing its $85 billion purchases of Treasury and mortgage-backed securities.

The asset purchases are part of the government's quantitative easing program that was implemented to keep long-term interest rates and mortgage rates low.

The cut finally came on Wednesday as the FOMC made its customary post-meeting statement. Effective in January 2014, the Fed will reduce its monthly purchases by $10 billion.

The QE purchase will be split between $40 billion in Treasury securities and $35 billion in MBS. The Fed expects that the economy will continue recovering at a moderate pace.

The FOMC statement noted that the Fed will continue monitoring inflation, which remains below the Fed's target rate of 2.00 percent, and the national unemployment rate, which remains above the Fed's target rate of 6.50 percent.

The statement noted that asset purchases are not on a predetermined course, and that the Fed will continue to closely monitor labor market conditions, inflation pressure and economic developments in the U.S. and globally.

The Fed did not change its target federal funds rate of 0.00 to 0.25 percent, and would not do so at least until unemployment falls to 6.50 percent. Changes to policy accommodation are made with the Fed's dual goal of achieving an inflation rate of 2.00 percent and achieving maximum national employment goals.

Bernanke Press Conference

Mr. Bernanke repeated key points of the FOMC statement, and noted that "highly accommodative monetary policy and waning fiscal drag" is helping with the economic recovery, but that the economy has much farther to go before it can be considered fully recovered.

Mr. Bernanke said that FOMC members saw the unemployment rate dropping from 7.00 percent in November 2013 to 6.30 to 6.60 percent in the fourth quarter of 2014. Improving labor markets and rising household spending were cited as signs of economic recovery.

Mr. Bernanke mentioned concerns about the high unemployment and underemployment rates and said that the Fed's benchmarks for unemployment and inflation would not automatically trigger reductions in its QE asset purchases.

He also said that the committee did not expect to adjust the target federal funds rate immediately after the national unemployment rate reaches 6.50 percent. 

Mr. Bernanke repeated that the Fed's actions regarding monetary policy and QE would be dependent on in-depth review of ongoing financial and economic developments, but said that further tapering of QE purchases is likely if the economy stays on its present course of moderate improvement.

Fed Meeting Minutes Show Hope In Economic Growth

The minutes of the Federal Reserve's Federal Open Market Committee meeting held October 29 and 30 were released Wednesday. The meeting began with a report from the Manager of the System Open Market Account and included updates on developments within domestic and foreign financial markets.

According to the report, no intervention by the Federal Reserve was required on foreign currencies during the period between the last and current FOMC meetings.

FOMC: Key Data Delayed by Shutdown

The FOMC noted moderate economic growth in the period since its last meeting, but also noted that several federal agencies delayed release of key statistics due to the government shutdown in early October. The FOMC minutes included updates on several economic sectors including:

Labor: Private non-farm payrolls for September increased at a slower rate than for August and the unemployment rate remains high at 7.20 percent. The FOMC has set a target unemployment rate of 6.50 percent as a benchmark for considering changes to the Fed's quantitative easing program, which supports lower long-term interest rates and mortgage rates.

A high rate of part-time employment and a slight drop in full-time employment may indicate why would-be home buyers remain on the sidelines. FOMC members noted that while weekly unemployment claims rose during some weeks in October, this was likely fall-out related to the government shutdown.

Manufacturing: Production rose slightly, but was flat other than for motor vehicles. The committee expected to see gains in production in the near term.

Personal Consumption Expenditures: This sector rose in August and retail sales excluding autos were significantly higher in September. Factors impacting consumer spending were mixed. Homeowners enjoyed increasing home prices and home equity, but overall consumer sentiment declined even as disposable income increased in August.

Housing: The committee said that little current data was available for the housing sector due to the shutdown. Building permits and housing starts for single family homes rose in August. After a significant drop in July, sales of new homes rose in August while sales of existing homes fell. Pending home sales also fell during August and September.

Quantitative Easing: FOMC members decided not to alter its current QE program during its September meeting; this caused investors and analysts to revise their expectations for the Fed taking action to reduce its current pace of $85 billion in monthly bond purchases.

Expectations for the total amount of asset purchases under QE were revised upwardly, which suggested that no major changes in current Fed monetary policy is anticipated.

Overall, the minutes of October's FOMC meeting echoed the committee's recent perception of moderate economic growth as expressed during its 2013 meetings, and its intention to maintain asset purchases and the target federal funds rate at current levels in the coming months.

Fed Meeting Minutes Release Hope Of A Stronger Economy With New Measures

The Federal Reserve's Federal Open Market Committee released its customary after-meeting statement on Wednesday. In the context of meeting its dual mandate of stabilizing pricing and achieving maximum employment.

The FOMC statement indicated that although the economy has improved in areas including household spending and labor market conditions, the national unemployment rate remains high and the housing market recovery has slowed.

Fed Says Fiscal Policy Restraining Economic Growth

The FOMC statement said that current fiscal policy and "retrenchment" is restraining economic growth as evidenced by failure to achieve benchmarks set by FOMC as indicators of a healthy economy. Benchmarks include a national unemployment rate no higher than 6.50 percent and achieving an inflation rate of 2.00 percent.

September's unemployment rate was 7.20 percent and inflation has run consistently below the FOMC objective. Not to be confused with the FOMC statement's references to monetary policy, the term fiscal policy refers to the government's budgetary policy.

Committee Sees "Moderate" Economic Growth, Seeks Improvement

While the Fed cited "moderate economic growth," the FOMC statement clearly indicated that the committee is not ready to alter its current policy of quantitative easing and estimates that it will maintain the target federal funds rate at between 0.00 percent and 0.250 percent for a considerable time after the QE bond-buying program is phased out.  

The Federal Reserve currently purchases $40 billion per month in mortgage-backed securities and $45 billion in Treasury securities as part of its QE program. The Fed will also continue its existing policy of reinvesting principal payments it receives on holdings of agency debt and MBS, as well as selling maturing Treasury securities at auction.

These activities are part of FOMC's strategy for supporting low mortgage rates and mortgage markets while making "broader financial conditions more accommodative." The Fed expects these measures to assist with a stronger economic recovery and stabilizing inflation at the Fed's target rate.

Fed To Continue Monitoring Economic, Financial Developments 

FOMC reasserted its position that any decision to alter current QE policy is not solely subject to economic benchmarks, but will be based on the Committee's close review of labor market conditions, inflation pressures, and financial developments.

FOMC commented in its statement that it will continue to review economic and financial conditions in the "coming months" and will decide when to taper its monthly asset purchase according to what is learned.

This suggests that changes to the present QE policy are not anticipated for several months, and that the effects of QE combined with dampened speculation may help with keeping mortgage rates lower.