The Home Buyer's Korner

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June 18th, 2015

Guy looking up in color

Federal Fed Statement for June 2015

Janet Yellen

U.S. central bank policymakers met for a two-day meeting Tuesday and Wednesday, discussing whether tightening monetary policy too soon could damage the economy and dampen prospects for maximum employment and a targeted 2 percent inflation. 

In its meeting the Fed kept interest rates unchanged this week, leaving them at historic lows since the financial crisis began nearly seven years ago.  The head of the central bank “Janet Yellen” said the committee will begin to raise rates once the Fed has seen further improvement in the labor market, but added that “wage growth remains relatively subdued…room for further improvement remains”. That’s good news for home buyers this summer as home mortgage should remain low, but we did see a hike in rates taking them over 4 percent last week with a little tapering off this week.

The Federal Open Market Committee was not expected to make significant changes to its post-meeting statement, but the Fed has signaled recently that it could begin returning interest rates to normal levels sometime this year, so if you’re thinking about purchasing a home it’s a good idea to start looking now.

The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. Keep in mind that we’ve had over 15 consecutive jobless claim under 300,000 and we’re beginning to see a tightening jobs market.

The Fed also released its updated projections for the U.S. economy over the next three years. Fed officials did revise down their projections for gross domestic product growth this year to between 1.8 percent and 2 percent, from 2.3 percent to 2.7 percent.

Along with the FOMC’s summary of economic projections was the “dot plot,” which shows where each participant in the meeting expects the federal funds rate will be at the end of the year and includes data for the next few years as well.

Fed officials left their interest rate projections for this year unchanged with the median forecast at 0.63 percent, signaling the FOMC is still on course for a September increase. 

Further ahead, the median rate projection for the end of 2016 was revised down to 1.63 percent, from 1.88 percent, while the median projection for the end of 2017 was revised down to 2.88 percent, from 3.13 percent. 

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