Explaining The Federal Reserve’s June 22, 2011 Interest Rate Decision

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Wednesday, the Federal Open Market Committee voted to hold the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent.

Another Unanimous Vote

The FOMC vote was 10-0 -- the fourth straight unanimous vote for the nation's Central Bank.

In its press release, the FOMC said that the economy is recovering, although "somewhat more slowly" than what was expected. Labor markets have been weaker than anticipated and the Fed believes that is, in part, a result of higher food and energy costs.

It also fingered supply chain disruptions as a result of "tragic events in Japan".

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Some economic bright spots identified by the Fed include expanding household spending, and increased business investment. These are positives for the U.S. economy.

The Fed's comments were in-line with what Wall Street expected from Chairman Ben Bernanke and the members of the Federal Open Market Committee.

Inflation Expected To Moderate Through 2011

The Fed stayed on message with respect to inflation, too.

It acknowledged inflationary pressures on the economy, but attributed them to rising commodity costs and the aforementioned supply-chain disruption. The Fed expects long-term inflation to be stable.

And, lastly, the Federal Reserve re-affirmed its plan to end its $600 billion pledge to bond markets June 30, and to hold the Fed Funds Rate near zero percent "for an extended period" of time.

Again, no surprise.

The FOMC's next scheduled meeting is August 9, 2011.

After The FOMC, Mortgage Rates Still Low

Mortgage market reaction to the FOMC statement has been muted this afternoon. Mortgage rates are unchanged and leaning lower. Note that sentiment can shift quickly, though. If today's mortgage rates fit your budget, consider locking in your rate.

Click here for a live mortgage rate quote.

(Post adapted from Bring the Blog)