The Federal Reserve announced today that it will be leaving the federal funds rate at 5.25%. This is the ninth consecutive meeting where they have left the rate alone, after raising the rate in the previous 17 consecutive months.
“Economic growth was moderate during the first half of the year. Financial markets have been volatile in recent weeks, credit conditions have become tighter for some households and businesses, and the housing correction is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters, supported by solid growth in employment and incomes and a robust global economy.
Readings on core inflation have improved modestly in recent months. However, a sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures.”
There had been speculation that the Fed would lower rates later this year as a reaction to the tightening of credit standards in the lending market. The above statement, though mentioning the credit issue, seems to indicate they are a bit more worried about inflationary pressures if they were to lower the rate. The bond market has indicated that mortgage rates may come down a bit, but it is difficult to predict with all that is going on related to the subprime market problems. Many lenders no longer exist, and remaining lenders have tightened criteria on loans, or eliminated programs altogether. Zero down programs still exist, but they are a bit harder to find and qualify for.
