The Fed policy change announced Tuesday led mortgage rates lower for the sixth week out of the last seven. As expected, the Fed made no change to the fed funds rate, currently between zero and 0.250%, where it’s been for almost two years, and left the “extended period” language in place regarding the outlook for low interest rates. In response to a stalling economic recovery, the Fed implemented a new policy to reinvest principal payments on their $1.25 trillion mortgage holdings into long-term Treasury securities to reduce borrowing costs throughout the economy, instead of letting its balance sheet shrink. Not surprisingly, US Treasuries rallied today, sending 10-year yields to the lowest level in more than 16 months, closing at 2.58%. The July Consumer Price Index continued to show that inflation is not a concern in the short-term, and some Fed officials are worried that inflation is too low. The Core CPI increased at a 0.9% annual rate, below the 1.5% to 2.0% range targeted by the Fed. Currently, the 30-Year Fixed is at 4.000% (4.148% APR) and the 15-Year Fixed is at 3.750% (3.760% APR). Later this week, we will see Housing Starts, Producer Price Index and Leading Economic Indicators.