Where Are Mortgage Rates Headed?

Where are rates heading? You may soon get more insight with a new proposal the Federal Reserve is weighing.

The Federal Reserve doesn’t traditionally make a point to reveal its predictions for future actions on interest rates widely known to the public — that is, until recently. This summer in a rare step, the Fed announced that it would keep short-term interest rates at nearly zero until 2013. The Fed may start making it a tradition to reveal more with a regular forecast of its future decisions on interest rates.

The Fed may consider adopting such a move at its Tuesday meeting, but if it does adopt an action, it most likely wouldn’t be announced to the public until January, The New York Times reports.

According to a recent article, the minutes of the Federal Reserve committee’s last meeting in November revealed that “participants generally expressed interest in providing additional information to the public about the likely future path of the target federal funds rate.”

In 2007, the Fed weighed a similar move but decided against it because they feared that public would take the predictions as commitments, and the Fed wanted to be able to change course if needed without public misunderstanding.

If the Fed adopted a forecast, it likely would predict where interest rates are heading for the next three years, and it would be similar to the forecasts it already publishes about economic growth, unemployment, and inflation four times each year, The New York Times reports.

Source: “Fed to Weigh Publishing a Forecast on Rates,” The New York Times (Dec. 11, 2011)