SEARCH BLOG: FEDERAL RESERVE
On August 13, I wrote:
The Fed Will ActOn August 17, I wrote:
... if the DJIA reaches 12,000.
That will be approaching a 15% "correction" from the high point [and the wheels will be squeaking too loudly to ignore].
That marks the point where the DJIA is 4% below the beginning of the year. Right now it is still up 3% for the year and just 8% down from the high, so the Fed will just be watching things.
By then, of course, the rest of the country's housing market will look like Michigan's... DOA. New construction will be shut down, foreclosures will be at record levels, and overall economic growth will be less than 2%.
As I said on August 13 and today, the Fed is getting nervous, but it is not quite ready to lower interest rates that affect housing or other consumer purchases. Right now it is hoping a bandaid will fix things... it won't.Today...
Federal Reserve Bank of Richmond President Jeffrey Lacker said the impact of ``financial turbulence'' on the broader economy will determine decisions on interest rates.12,000 on the DJIA might indicate a signal of "financial turbulence." So also might a continued diminishing of the housing market and corresponding increase in foreclosures.
``Financial market volatility, in and of itself, doesn't require a change in the target federal funds rate,'' Lacker said at a luncheon of the Risk Management Association of Charlotte.
``Interest-rate policy needs to be guided by the outlook for real spending and inflation,'' and markets can change that assessment if they induce changes in growth or prices.
Right now the DJIA is treading water over 900 points off its recent high...