Posted on 03/21/2007 11:37:08 AM PDT by bd476
Central bank holds benchmark at 5.25% amid housing market worries
Federal Reserve policymakers Wednesday decided to leave key interest rates unchanged, determining the economy is in no imminent danger despite recent concern about problems in the housing market.
Fed Chairman Ben Bernanke and his colleagues concluded after a two-day meeting that the economy is likely to continue to grow moderately despite what it called an "ongoing" adjustment in the housing sector. The Fed left the benchmark overnight rate at 5.25 percent, exactly where it has been since the central bank ended a two-year rate-hike campaign in June 2006.
But the Fed said in a statement that inflation remains the principal concern of policymakers, suggesting that rates are unlikely to be cut anytime soon. Stock prices jumped immediately after the 2:15 p.m. EDT announcement.
The central bankers met amid mounting concern on Wall Street, Capitol Hill and elsewhere about troubles in the "subprime" mortgage market.
These lenders, who make home loans to people with blemished credit histories or low incomes, have been battered. Weak home prices and rising interest rates have made it increasingly difficult for borrowers to keep up with their payments. Delinquencies and foreclosures in the subprime mortgage market are soaring.
The stock market has been roiled in recent weeks, in part by fears that the subprime mortgage industry problems could spill over into other markets and short-circuit overall economic activity.
Full text of Fed statement
Following is the text of the full statement issued by the Federal Reserve:
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment...
(Excerpt) Read more at msnbc.msn.com ...
Federal Reserve Release
Press Release
Release Date: March 21, 2007
For immediate release
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.
Federal Reserve Release
LOL!
I knew it had to be something big like AlGore stating that GW is a lie or something....
Thank you Bernanke. This is great for Gold and Oil.
Indeed.
The Feds are between a rock and a hard place. Either fall behind the inflation curve or let the mortgage market blow up.
Democrats and Third Partyists deeply saddened.
Such wisdom. Are you on the board? :-)~
Thank you Bernanke. This is great for Gold and Oil.
_______________________________________________________
Not bad fer my T-Bills either.
I think with the subprime market meltdown and housing market crash upon us this year will show that they blew it this week in 2 ways. (1) They should've lowered rates this week down to 500bp, (2) They should've given guidance of a bias towards future lowering of rates due to the situation of a very problematic housing market.
History will show that the Federal Reserve blew it by raising the funds rates up to 525bp in June 2005. They should've stopped at 400bp in December 2004. And they should've used their energies to regulate against the fraudulent practices of mortgage lenders in the 2005 sellers' market who were pumping up housing prices by selling mortgages involving unacceptable combinations of LTV and PTI. Too many buyers of homes in 2004, 2005 and 2006 are going to get burned in 2007 and 2008 with default, foreclosure, bankrupcy and ruin.
Sorry, but I've got no sympathy for people who took out variable mortgages that they could barely afford at what were rediculously low interest rates, thinking that those rates would not rise. To me, the 'no down payment' and the 'interest only' crowd are the same as the 'free lunch' crowd. The 'American Dream' is not an 'American Right'
The only problem I have is that we taxPAYERS are somehow gonna get stuck with the bill.
That's my complaint too. The taxpayers may get stuck with the bill. I found yesterday's hearing in the Senate to be very lame. Senator Dodd definitely and totally wiped out any chances he has at becoming President. He totally rolled over and let the corporate lawyer for Countrywide get away with perjuring himself. I found it interesting how the other mortgage banks had sent their CEO(s) while Countrywide just sent their lawyer. Yet there was hardly a peep from the Senators on the absence of Countrywide's CEO who declined to attend. I guess he was afraid to be required to tell the truth under oath. Instead he stayed home counting the money he gained by selling a few more million bucks of his company's CFC stock this week. They will take a multibillion dollar hit to their balance sheet this year. And they deserve it for knowingly underwriting mortgages for 60% of their 2006 customers who they knew could not afford an honest loan.
Disclosure: I'm very recently short on CFC stock and for good reason IMHO.
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