The FOMC Cycle and Consumer Decision Making: Evidence from the Residential Housing Market

Abstract

Monetary policy works through financial markets to affect real consumer decisions. Buying a home is one of the most important consumer decisions, and we study the impact of the FOMC cycle on the timing and cost of mortgage applications. We find that the FOMC cycle is a focal point of attention for some consumers, driving an increase in the demand for mortgage credit ahead of these meetings. This bunching is more concentrated among the financially literate and when monetary policy uncertainty is high. It also leads to an increase in the cost of mortgage credit ahead of FOMC meetings.

Keywords: Monetary Policy, FOMC, Uncertainty, Housing Market, Mortgage Application

JEL Classification: E52, E58, G21