Tuesday, April 6, 2010
Fed: Recovery may lose steam
Despite recent moderate signs of improvement to the economy, Federal Reserve policymakers are worried that the economic recovery may lose steam moving forward. The Fed believes some sectors of the economy may suppress overall growth. However, in an effort to fuel the economic recovery, Fed policymakers may decide to raise rates and move away from the central bank's policy of exceptionally low rates. Even though most economic data, with the exception of the housing market, have met or exceeded the Fed's expectations, a number of policymakers pointed out that the economic recovery could not be sustained without a substantial a substantial pickup in job creation.
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According to this article, the Fed is worried that several sectors of the economy could stifle the overall growth, such as housing market. To be specific, although the government used a lot of strategy, like homebuyer tax credit, to stimulate the consumption in the housing sector, the gain of the housing sector still level off. Fed members expressed their concerns over the fact that commercial and industrial real estate markets continue to weaken. It remains a question that whether the situation will worsen if the government cannot use any other method to support this weak sector.
ReplyDeleteReal estate will definitely need to be given a boost however the passing of Helping Families Save their Homes Act in 2009 has already extended FDIC coverage of $250,000 to 2013 and it still doesn't appear that consumers have increased their confidence in real estate yet. After the sub-prime mortgage crisis, it will be interesting to see how long it takes before consumers regain confidence in the sector.
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