Heading into today’s Fed announcement, we didn’t expect to receive any significant surprise on the stance of monetary policy.  Financial markets had long since ruled out the possibility of a rate cut and we knew Powell could only really acknowledge recent progress in inflation data while maintaining that more progress is needed for additional rate cuts.  In not so many words, that’s exactly what happened.

In so many words, there was a bit of back and forth in the underlying bond market between the 2pm policy statement and the 2:30pm press conference. A verbiage change in the statement caused bonds to lose ground. When bonds lose enough ground in the middle of the day, mortgage lenders can increase rates (in mortgage market jargon, a “negative reprice”). 

Then in the press conference, Fed Chair Powell clarified the verbiage change such that the market was able to move right back to pre-Fed levels. With that, lenders who hadn’t already repriced were thus able to keep the AM rates intact. Only a small handful ended up repricing and as of this writing, a few of them have repriced in the other direction.

Here’s What Changed in The New Fed Announcement

What follows is a comparison between today’s newly released Fed announcement and the previous announcement.  Additions are blue/underlined. Subtractions are red/struck-through.  Unchanged words are black.

Recent indicators suggest that economic activity has continued to expand at a solid pace. Since earlierThe unemployment rate has stabilized at a low level in the year,recent months, and labor market conditions have generally eased, and the unemployment rate has moved up but remains low.remain solid. Inflation has made progress toward the Committee’s 2 percent objective but remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.

In support of its goals, the Committee decided to lowermaintain the target range for the federal funds rate by 1/4 percentage point toat 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Source: Mortgage News Daily

Mortgage Rates Barely Budge After Fed Announcement

Here’s What Changed in The New Fed Announcement