This month’s Federal Open Market Committee meeting begins tomorrow and culminates on Wednesday at noon our time with the reading of the monetary policy statement. Some speculate that the Fed will announce a formal plan to ease out of the five year long economic stimulus plan known as quantitative easing. My viewpoint is where this is the last statement of outgoing Chair Ben Bernanke, no such plan will be announced. Is it because the economy is floundering? Kinda, but not really. Data shows that we have hit bottom and begun to turn the corner (please excuse me for mixing my metaphors—guess I’m still feeling cheeky for saying “kinda”) and we will have to return to normalcy sooner rather than later. I believe though that Mr. Bernanke will want to be remembered for all that has been done on his watch, and not as the guy who prematurely turned off the lights when the show was still going on.
Also something to consider is the political pressure for the Fed to keep rates low. Think about it: as of this morning the US Government owes $17,236,033,598,592.96, and can’t get its spending under control. According to the Treasury Department the average interest rate paid by the US Government is 2.543%, which equates to $438,312,334,412.22 in interest every year. The National Debt has continued to increase an average of $2.65 billion per day since September 30, 2012! Rates going up will affect the government more than it will someone who has their proverbial house in order.
In order to get your house in order, why not look at a 15 year loan with rates still at 3.5%? (APR will vary and is dependent on down payment, loan amount, the presence of mortgage insurance, etc.)