Are You a Fed Watcher?

Like ‘em or not, the Fed holds the strings to monetary policy and our eventual safety. So, most people in the real estate industry watch the Fed and its moves (or lack of moves).

On September 16, 2008 most waited anxiously for the news from the Fed on their position for a rate cut, or a hold.

Wall Street seems to show its approval or displeasure by the direction of the market after the Fed announces its intentions. And at 2:15Pm east coast time the Fed did just that. They announced a hold position…and Wall Street reacted but how can we let our personal opinion be known? I have my own opinion but just to be sure you have the Fed’s position to help you form your opinion, here is their statement as published in the LA Times…

The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2%. Strains in financial markets have increased significantly and labor markets have weakened further. Economic growth appears to have slowed recently, partly reflecting a softening of household spending. Tight credit conditions, the ongoing housing contraction and slowing in export growth are likely to weigh on economic growth over the next few quarters. Over time, the substantial easing of monetary policy, combined with ongoing measures to foster market liquidity, should help to promote moderate economic growth. Inflation has been high, spurred by the earlier increases in the prices of energy and some commodities. The committee expects inflation to moderate later this year and next year, but the inflation outlook remains highly uncertain. The downside risks to growth and upside risks to inflation are both of significant concern to the committee. The committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

It appears to me that in the first 3 sentences there were 6 reasons to lower the fed funds rate, so I guess you know my stand on this.

Your comments are most welcome. Please send them when you have a moment.

And thank you for making me Your Orange County Real Estate Connection.

Best regards, Michael Caruso Broker ABRM CRB CRS
2007 President, Orange County Association of Realtors