Federal Reserve likely to postpone tapering

December 10th, 2013

The Fed will likely hold off tapering until 2014

Mortgage rates in the United States are heavily dependent upon the actions of the Federal Reserve. Since the economic crisis in 2008, the central bank has been spending $85 billion a month on bonds to cushion the market, which has kept borrowing costs low. However, when industry reports show improvements in the nation’s overall economic health, the Fed tends to suggest that it might start tapering its bond-buying. Such a possibility causes mortgage rates to jump, decreasing home affordability for buyers.

After a strong November jobs report, analysts worried that tapering was drawing near, but it turns out that the central bank’s officials are not in a hurry to curb their spending. In fact, according to The New York Times, tapering may not occur until next year.

“Everything else equal, I would like to see a couple of months of good numbers,” Charles Evans, president of the Federal Reserve Bank of Chicago, told Reuters with regard to November’s optimistic jobs numbers.

Evans added that the slow pace of inflation continues to be a concern, since rising prices would help stimulate the economy. Without that, the U.S. might still need help from the Fed, which is good news for mortgage borrowers. Economists don’t anticipate rates to rise much in the near future.