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Money Minute: Waiting for the Fed's Decision; Mortgages to Get Pricier

12/18/2013

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It's all about the Fed.

You may have heard this song before, but after months of speculation, we could find out Wednesday afternoon when the Federal Reserve will begin to cut back on its massive bond-buying program.

Now it's important to understand that even if the Fed does begin the long-awaited taper, it won't end the stimulus program. It has been pumping 85 billion dollars a month into the economy. When the taper does begin, it will "only" buy $70 billion or $75 billion a month.

Despite the Fed's pledge to keep interest rates low, mortgage rates are likely to rise. Fannie Mae and Freddie Mac will soon begin to charge more to borrowers who don't make a large down payment and have a high credit score. The effective mortgage rate on new loans could increase by as much as half a point.

An important court win for Philip Morris. The New York Court of Appeals said long-term smokers who don't show signs of disease can't sue the Altria (MO) unit to set up a program to monitor their health. The court upheld an earlier decision that there was no legal basis for such a claim.

On Wall Street, the Dow Jones industrial average (^DJI), edged 9 points lower Tuesday, the Nasdaq composite (^IXIC) fell 6 and the Standard & Poor's 500 index (^GPSC) lost 5 points.

Another well-known company makes its Wall Street debut today. Movie theater owner AMC Entertainment priced its stock at $18 a share, which is at the low end of expectations. And there's an interesting twist to this initial public offering. The company offered shares at the IPO price to its most loyal movie customers. AMC is owned by a Chinese conglomerate.

Finally, the number of students enrolling in law school continues to decline. The American Bar Association says there were 11 percent fewer first year students this year, and the total number is the lowest it's been since 1977. One reason: the high level of student debt for many recent college grads.

Source: http://www.dailyfinance.com/on/federal-reserve-decision-stimulus-mortgages-get-pricier/


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