Friday, June 29, 2007

No changes in the Fed Funds Rate

As expected, the Federal Open Market Committee decided to keep interest rates at 5.25% where they’ve been for a year now. The Fed’s announcement suggested that inflation is still a concern but the situation is improving somewhat. The next Fed meeting is scheduled for August 7th.

Last week’s interest rates, not surprisingly, showed modest declines, with the 30-year home loan at 6.67%, down from 6.69%, and 15-year fixed mortgages slipping to 6.34% from 6.37 a week earlier. 5-year adjustable-rate mortgages carried an average interest rate of 6.30, slightly lower than the previous week’s 6.31, and one-year adjustable-rate mortgages averaged 5.65%, down from 5.66.

Commenting on this week’s housing-related news, Freddie Mac’s chief economist Frank Nothaft said, “This week we saw further effects of the current housing recession”. A slightly unusual choice of wording, but “recession” is a word everyone uses today anyway. What is worrying economists is the fact that it might grow bigger than a “mere” “housing recession”. Unfortunately saying that the economy at large won’t be affected by the housing slump does little to improve the situation, but it’s hard to tell how to prevent trouble. Perhaps the Fed knows.

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