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Fed to forecast rates

By Polyana da Costa ·
Tuesday, January 3, 2012
Posted: 3 pm ET

Want to know when interest rates will rise? The Fed will let you know beforehand.

From now on, each member of the Federal Open Market Committee will tell us his or her rate forecast for the fourth quarter of the year and for the next few calendar years, when the Fed publishes its economic projections. The FOMC releases the projections four times a year. The next meeting is scheduled for Jan. 24-25.

Starting later this month, each Fed official will also publish when he or she expects the first increase in the federal funds rate, according to minutes from the FOMC December meeting, released today. The Fed has kept the rate near zero since December 2008.

There is no doubt that rates will rise at some point, but it's nice to know consumers will get at least a hint of when that will take place before the actual announcement.

While the short-term federal funds rate is not directly tied to mortgage rates, it influences mortgage rates, just like many other Fed moves. When the Fed decides to raise its target for the federal funds rate, investors normally view that as an indication that the economy is strengthening and that  may lead to higher mortgage rates.

For now, there's plenty of bad news to keep rates low.

This is from the FOMC minutes:

"Activity in the housing market continued to be depressed by the substantial inventory of foreclosed and distressed properties and by weak demand that reflected tight credit conditions for mortgage loans and uncertainty about future home prices."

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