Texas Real Estate and Mortgage Update

Janet Yellen’s prepared text to the House Financial Services Committee was released at 8:30. Her appearance is scheduled at 10:00am EST, a new policy releasing the prepared testimony 90 minutes prior to her reading it into the record. Not much new in her comments; she will continue the policies that Bernanke had, saying she was instrumental in formulating the Fed polices and deem them still relevant. Some of the highlights of the text:

• The pickup in economic activity has fueled further progress in the labor market. About 1-1/4 million jobs have been added to payrolls since the previous Monetary Policy Report last July, and 3-1/4 million have been added since August 2012.
• The unemployment rate is still well above levels that Federal Open Market Committee (FOMC) participants estimate is consistent with maximum sustainable employment.
• Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high.
• Inflation remained low as the economy picked up strength, with both the headline and core personal consumption expenditures, or PCE, price indexes rising only about 1 percent last year, well below the FOMC’s 2 percent objective for inflation over the longer run.
• We have been watching closely the recent volatility in global financial markets. Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook.
• At its January meeting, the Committee decided to make additional reductions of the same magnitude. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. That said, purchases are not on a preset course, and the Committee’s decisions about their pace will remain contingent on its outlook for the labor market and inflation.
• The Committee has said since December 2012 that it expects the current low target range for the federal funds rate to be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation is projected to be no more than a half percentage point above our 2 percent longer-run goal, and longer-term inflation expectations remain well anchored. Crossing one of these thresholds will not automatically prompt an increase in the federal funds rate, but will instead indicate only that it had become appropriate for the Committee to consider whether the broader economic outlook would justify such an increase.
•  In December of last year and again this January, the Committee said that its current expectation--based on its assessment of a broad range of measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments--is that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the 2 percent goal.

The take away is that nothing has, or will be changed, at the Fed for most of this year unless the economic outlook weakens. Most of the forecasts from economists now is that growth will continue and inflation isn’t going to increase much. The Fed is anxious to increase inflation to its 2.0% target, now at about 1.0%. Another tapering move is likely at the March FOMC meeting. The Fed will continue keeping rates very low and in turn continue to drive investments into equity markets.

The House will vote for a clean debt limit increase tomorrow, not news as there was little concern that another fight would develop like last October. 

If you did not take my advice and lock you will most likely want to float your rate in hopes that it gets better tomorrow.