Federal Reserve

Newly installed Fed-chair Janet Yellen held her first press conference yesterday, and her remarks could portend big changes to mortgage rates and housing in the months ahead. Yellen suggested the Federal Reserve may begin raising interest rates as soon as next spring and said bond purchases would likely be wound down by this fall. Her comments were more hawkish than expected: interest rates rose as Yellen spoke, while stocks fell nearly 200 points before recovering some of their losses.

Several influential members of the Federal Reserve board sounded the alarm late last week on the central bank’s stimulus program. Dennis Lockhart, Richard Fisher and Charles Plosser, who all wield votes this year on the twelve-member Federal Open Market Committe(FOMC), delivered a clear message in separate interviews and speeches on Thursday and Friday: continued Fed stimulus is a bad idea. Their comments suggest Fed bond buying will soon be coming to an end, likely resulting in higher mortgage rates by summer.

Dallas Federal Reserve president Richard Fisher, never one to shy away from colorful metaphors(he recently called bond market traders ‘feral hogs’), caused a stir this week when he quoted well-known analyst Peter Boockvar:

“. . . QE(quantitative easing) puts beer goggles on investors by creating a line of sight where everything looks good . . .”