Heading into today, I knew that the afternoon Fed’s announcement was the biggest potential flashpoint of interest rate movements, and that the movement was probably not extreme. The unknown, as usual, was the direction of the movement above. Thankfully, it was low.
This was not the case this morning. Off the gate, the average mortgage lender offered a slightly higher rate compared to the latest levels yesterday. After the market responded to the Fed, lenders revised the rate to the lowest level in more than a week (very close to the low end of the range back to mid-October).
What did the Fed say to lower the fees?
First, the bond market movements were not significant, even on the standard for normal non-class days. That said, there was definitely a response to the Fed. Part of this has been linked to the Fed’s rate forecasts remained fairly grounded despite concerns that recent inflation measures could drive those forecasts higher.
Additionally, the Fed has made several changes to the way it processes payments received on bonds it already owns. This change allows the Fed to reinvest further these payments to buy new bonds, with bond purchases appropriate for the fees and everything else being equal.
