The Federal Reserve Chairman, Ben S. Bernanke is presenting his Semiannual Monetary Policy Report to Congress today. His statement was released at 10EST about 25 minutes before he started speaking.
The MBS market reacted positively to the released statement. At 9:45 EST, MBS prices were down -22BPS from yesterday’s close. After the statement was released, MBS prices moved to +12BPS from yesterday’s close. That is a +34BPS swing. This gain is due mainly to the comments that appear to state that we will have a very low risk of inflation in the near term. This is great for Interest rates because as MBS rise interest rates go lower.
Below is the complete text of his statement. The following key points have helped MBS prices and are of interest to the mortgage industry:
- Consumer price inflation remained subdued in the first six months of 2009
- Decline in housing activity appears to have moderated (aka a “bottom”)
- Output will increase slightly in over the remainder of 2009. The recovery is expected to be gradual in 2010 with some acceleration in activity in 2011.
- Inflation to remain at low levels through 2010
- Later this week the Federal Reserve will issue a “proposal” (so not a ruling a this point) that will include new mortgage disclosures and new rules governing the compensation of mortgage originators.
