What’s Ahead in 2013?
New Year Home Loan News
Homeowners and homebuyers have a lot to keep track of as we head into 2013. Here’s a quick overview of the top stories to watch over the next few months.
In their final meeting of 2012, the Fed vowed to continue the third round of their Bond buying strategy (known as Quantitative Easing or QE3). They also announced that they will begin a fourth round of Quantitative Easing in January.
Quantitative Easing is when the Fed buys Treasuries and Bonds in the hope of achieving:
- Inflation. To cause a general increase in prices and avoid a deflationary economy.
- Employment. To encourage business expansion and keep the unemployment rate from getting worse.
- Higher Stock Prices. Easing makes stock purchases attractive, causing higher demand and a buoyant stock market.
But what really took the markets by surprise was the Fed’s decision to tie the Fed Funds Rate (the rate banks charge each other for lending money overnight) to the Unemployment Rate. Instead of sticking with their plan of maintaining low rates until “at least mid-2015,” now the Fed is going to hold the Fed Funds Rate steady as “long as the Unemployment Rate remains above 6.5%.”