FED NOT EVEN THINKING ABOUT RAISING RATES TILL 2012

YehoramShenhar

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FED NOT EVEN THINKING ABOUT RAISING RATES TILL 2012This is from the set of FOMC minutes from the April 27-28 policy meeting. I underlined the key sentence from this paragraph:
“Participants expected the economic recovery to continue, but, consistent with experience following previous financial crises, most anticipated that the pickup in output would be rather slow relative to past recoveries from deep recessions. A moderate pace of expansion, in turn, would imply only a modest improvement in the labor market this year, with the unemployment rate declining gradually. Most participants again projected that the economy would grow somewhat faster in 2011 and 2012, generating a more pronounced decline in the unemployment rate. In light of stable longer-term inflation expectations and the likely continuation of substantial resource slack, policymakers anticipated that both overall and core inflation would remain subdued through 2012, with measured inflation somewhat below rates that policymakers considered to be consistent over the longer run with the Federal Reserve`s dual mandate.”



MORE TROUBLING HOUSING DATA

Following on the heels of the near 30% weekly plunge in the MBA purchase index yesterday, we saw some more bad housing news. Data from the Mortgage Bankers Association (MBA) showed that mortgage delinquencies rose to 10.06% in Q1 from 9.47% (on a seasonally-adjusted basis), a new record high. The MBA did note that the seasonally-adjustment process may be flawed and suggested using a “degree of caution” when interpreting these numbers. Even so, on a year-ago basis, delinquencies were up by 94bps.
Mortgage delinquencies in the U.S. hits a new record high, now over 10%
Virtually every category of delinquencies saw an increase: 90 days-plus due hit a new record high, early-stage delinquencies (30-59 days) increase by 0.2ppt, fixed/adjustable rate mortgages and prime/subprime all increase in the quarter (the one exception was FHA mortgages). Regionally, Florida is “still getting worse” while California seems to “showing signs of improvement”.
The rate of new foreclosures inched up, to 1.23%, and the total inventory of foreclosures moved up, to 4.63%, which translates to 2 million homes. This can’t be good news for home prices and our guess is that home prices will move lower with all this supply. (Already, the Case-Shiller home price metric showed accelerating price declines in February.)

SCARY MATH

1 in every 10 American homeowners missed a mortgage payment in Q1 (a record)
1 in 6 Americans are either unemployed or underemployed
Over 4 in 10 unemployed Americans have been out of work for at least six months.
1 in 4 Americans with a mortgage have negative equity in their homes.
1 in 10 Americans believe their income will rise in the next six months.
1 in 5 Americans see business conditions improving in the next six months.
1 in 50 Americans plan to buy a home in the next six months.
1 in 8 Americans believe that current government policy is actually helping the economy.
1 in 10 American small businesses have a job opening.
1 in 10 American’s credit card usage is being written off (a record).
There are 5 unemployed workers competing for every job opening (hence downward pressure on wage growth).