Yesterday, the Fed announced that they would buy up to $1.2 Trillion worth of mortgage backed securities and long term treasuries – which should result in lower rates in the short term. I also expect it to result in higher rates in the longer term (possibly much higher) as inflation kicks in – although the smartest guys in the room don’t seem to think that inflation poses that big of a threat:
“In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued…” the Fed said in a release.
“Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”
Well, I am glad that I am not the one faced with task of solving these problems, but from everything I can tell – here is what it all means in plain English:
In the short term, mortgage rates will go lower.
After the “short term” low-rate period?
Phoenix Arizona Mortgage Rates March 19 2009