Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

FOMC Policy Statement, Fed's Level of Uneasiness Up Several Notches, Postpones Action

Interest-Rates / US Interest Rates Sep 22, 2010 - 03:18 AM GMT

By: Asha_Bangalore

Interest-Rates

Best Financial Markets Analysis ArticleAs expected, the target federal funds rate was left unchanged.  President Hoenig of Kansas City cast the lone dissenting vote; he has taken the opposing stance in all meetings year-to-date. 


The Fed tweaked its rhetoric slightly with respect to its evaluation of output, employment, spending, and bank lending (see table below).  The policy statement presented a major change in the extent of Fed's concern regarding the possibility of a deflationary situation in the economy. 


The Fed essentially made it abundantly certain it stands ready to provide on all sorts of support to prevent a deflationary situation from becoming entrenched in the economy.  The excerpts below highlight the important change in the policy statement. 

Aug.:  The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Sep.:  The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.

The nature of details seen in the August Consumer Price Index and projections of  less than stellar economic growth have prompted the Fed to explicitly convey its intentions to financial markets.  The main conclusion is that if economic conditions weaken, the Fed will take action soon. 

Home Construction - Mixed Message

Construction of new homes increased 10.5% to an annual rate of 598,000 in August vs. 541,000 reading in July. The July estimate was revised down slightly to show a smaller increase than previously estimated (+0.4% vs. +1.4%).  Multi-family starts moved up nearly 33% in August and that of single-family homes starts rose 4.3% during August.  Construction of multi-family units has risen, while single-family starts have languished for the most part in recent months.  On a regional basis, housing starts fell in the Northeast (-24.3%), but moved up in the Midwest (+21.7%), South (+7.0%), and Midwest (+21.7%). 


Permits issued for new multi-family homes rose 9.8% to an annual rate of 168,000 in August.  More importantly, permit extensions for single-family units declined 1.2% in August, which is the fifth consecutive monthly decline.  This trend bodes poorly for future housing starts.  The August housing starts report essentially contains a mixed message with a slight bias supporting forecasts of soft growth in construction of new homes in the near term.

The End of the Great Recession - Addendum

In the daily commentary of September 20, we included a chart to highlight the moderate recovery path of the current upswing in economic activity compared with the situation after the long recessions of 1973-75 and 1981-82.  We should have taken this line of thought further because it is important to note that the nature of the 2007-2009 recession is vastly different from other post-war downswings in economic activity.  The U.S. economy has experienced a financial crisis of historical dimensions along with the longest and deepest credit crunch (see chart 5) not seen in the post-war period.  Recessions combined with financial crisis are typically followed by significantly soft recoveries.  Comparing the current recovery with that of those following the 1973-75 and 1981-82 recessions is an incorrect evaluation. 

 

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules