It’s official. The Fed’s Open Market Committee yesterday affirmed that the housing sector still depressed even though the economic recovery is on a firmer footing and spending and investment continue to expand.
Despite the problems with housing, the Fed decided to keep its current monetary policies unchanged. It will continue to reinvest principal payments from its securities holdings and purchase $600 billion of longer-term Treasury securities by the end of the second quarter. It also will maintain the Fed funds rate at 0 to ¼ percent.
With the Treasury program scheduled to run at least through June, its future will be an important subject of discussion at the next FOMC meeting in April. Al;spo on the docket later this year will be a decision about when and how to exit from their easy-money policies by raising interest rates.
For now, at least, yesterday’s decision should encourage mortgage interest rates to remain below five percent. Last week, Freddie Mac reported rates on a 30 year fixed averaged 4.88 percent with an average 0.7 point. Last year at this time, the 30-year rate averaged 4.95 percent.
Freddie Mac’s economists predict 30-year rates to rise slowly during the year as the economy strengthens, reaching 5.7 percent by January.