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In a 9-1 vote, the FOMC left interest rates unchanged at 0%-.25% and retained the phrase that interest rates would remain low for an "extended period". The statement notes that the deterioration in the labor market is stabilizing as opposed to abating. Consumer spending is restrained by high unemployment, tight credit, modest income growth and reduced housing wealth. Excess resource utilization will keep inflation contained. The purchase of mortgage backed debt and agencies will end as planned at the end of the month. It remains to be seen what type of impact this will have on mortgage rates. The lone dissenter was President Hoenig who believed "extended period" was not warranted as it may lead to "financial imbalances". The statement confirms that low rates will continue to be a fixture.
Mary Ann Hurley
D.A. Davidson & Co.
Bond Market Today
Partner Market Place
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