Is QE3 Coming? Bernanke Discusses Extra Round Of Stimulus

The Federal Reserve released its June 2011 Federal Open Market Committee meeting minutes Tuesday. More stimulus may be coming.

A 6,889-Word Recap

The Fed Minutes is published 8 times annually, three weeks after each scheduled Federal Open Market Committee meeting. It’s the official log of the meeting’s conversations and debates.

The Fed Minutes is the lengthier companion piece to the FOMC’s more well-known, post-meeting press release. As compared to the brief-and-focused press release, by comparison, the Fed Minutes are long and detailed.

June’s press release was 458 words long. Its minutes totaled 6,889 words.

What The FOMC Discussed

The June minutes reveal some interesting perspectives from within the Federal Reserve.

• On growth : Economic recovery had been slower than the committee expected
• On housing : The market is depressed. Foreclosures “hold back” construction.
• On rates : The Fed Funds Rate should remain low for an “extended” period

In addition, the Federal Reserve discussed whether a new round of economic stimulus was necessary. Committee members agreed that a poor outlook for employment in the medium-term would make this move more likely.

There was little that surprised Wall Street in the June Fed Minutes. This is why market reaction has been muted since its release.

The FOMC meets next August 9. If jobs data weakens between now and then, expect the stimulus chatter to continue.

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Get Your Mortgage Before QE3 Starts

For now, mortgage rates remain near their all-time lows. And they’re low. Really low. Without much lower to go. Yet, there’s a lot of room for rates to rise. Especially if employment stays weak and QE3 is passed.

When QE1 hit, mortgage rates dropped. When QE2 hit, mortgage rates rose. If QE3 passes, look for the same rocket-ride in rates we saw after QE2. Stimulus is inflationary and the U.S. economy is fighting inflation already.

Be safe. Get locked soon.

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(Post adapted from Bring the Blog, a daily blog-writing service)