The mortgage industry and other financial sectors will be paying close attention to the Federal Open Market Committee’s meeting tomorrow.
Analysts generally don’t expect the Fed to raise interest rates yet, but they’ll be watching for wording changes in the Fed’s policy statement issued after the meeting, according to news reports.
The federal funds target rate, which banks charge each other overnight, is at a 46-year low of 1 percent. A change in the Fed’s target rate has no direct effect on other rates, but it could have an indirect effect on other rates, such as mortgages.
In fact, mortgage rates have already risen in response to comments Federal Reserve Chairman Alan Greenspan made to Congress last month that interest rates must rise at some point and that deflation is no longer a concern.
Some observers doubt the Fed will raise rates before the November presidential election; others predict a hike could come as early as this summer.
Either way, the focus will be on the policy statement the Fed issues tomorrow. Observers will look for changes in the wording that could give clues that the Fed is further readying the markets for a rate hike.