< Read Another Article WHO CONTROL'S THESE INTEREST RATES ANYWAY? OVERVIEW The Federal Reserve has a committee known as the "Open Market Committee" otherwise known by their acronym, FOMC. They meet for the purpose of determining short-term interest rates. This is their means to achieve their goals. By influencing the cost of the money supply the Fed strives to attain "low un-employment, maximum economic growth, stable prices and ideally speaking, low long-term interest rates." Generally speaking, a rate increase also known as tightening, aims to curb inflation or future inflation, while a rate decrease also known as easing, hopes to encourage economic growth. Think of it like a credit card. Carrying a balance with a higher interest rate means a higher payment and thus discourages future spending. A lower interest rate means a lower payment and therefore encourages the consumer to spend. This works the same with your mortgage. With lower interest rates you qualify for a larger home via a lower payment and the respective lower qualifying ratio to your income. This alone can be a sufficient factor for people to sell the home they live in and move up or enable the first time homebuyer to take that leap. Thus, the goals of the FOMC, economic growth -- by making the cost of financing reach for a peak balance, to promote maximum growth at the lowest possible interest rates without risk to inflation. WHAT HAPPENS AT AN FOMC MEETING? The FOMC is the committee that Alan Greenspan is the Chairman of. You've no doubt heard about him. Rates can spin on a dime at the mention of his name. This committee is a Federal Board of governors who are a rotating group of Fed bank presidents who preside over their respective geographic regions around the country. FOMC members review current economic data, financial market conditions and future economic indicators to decide whether monetary policy needs to be adjusted by raising or lowering interest rates. Once they meetÉ wah-lah! The Federal Fund rate is adjusted and it trickles down to us. Rates go up or rates go down or they just stay the same. Whatever the outcome, this Federal Board of governors, led currently by Mr. Greenspan provide constant subject matter for debate for professors, scholars, mutual fund portfolio managers and us trying to speculateÉ what will they do next? If you have questions feel free to call Action Residential Mortgage at 650-638-3600, email us at Info@ActionMortgage.com or visit our web-site at www.ActionMortgage.com . Rich Young < Read Another Article

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