Minutes of the April/May Federal Open Market Committee (FOMC) recently released may have a significant impact on mortgage rates going forward. One significant development from the meeting suggests that the present quantitative easing (QE) program may be modified in the near future.
The current QE program involves the Fed purchasing $85 billion per month in mortgage backed securities (MBS) and Treasury bonds. The Fed’s goal with QE is keeping long-term interest rates, including mortgage rates, low.
Considerations mentioned in favor of slowing the current QE program include concerns over “buoyant” financial markets as evidence of a developing economic “bubble”. FOMC members in favor of continuing the current easing program cited fears of economic deflation resulting from cutbacks in QE.
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