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Bernanke Says Fed Will Take "Decisive" Action...

Federal Reserve Chairman Ben Bernanke, Alan Greenspan's replacement, yesterday announced that the "Fed" is entering the New Year with plans to aggresively cut interest rates. 

Bernanke said that the Federal Reserve board has decided that avoiding a recession is a much greater worry that containing inflation.

Many Fed Watchers believe that at the next meeting of the FOMC... the Federal Open Market Committee... which meets about every six weeks... will drop interest rates by a full one-half percent instead of the "baby step" cuts of one-quarter percent that have been seen over the past fiscal quarter.

Many people who in the past criticized Alan Greenspan's approach to interest rates, have come full circle and have been coming down even harder on Bernanke.  As much as many wished that Greenspan would retire earlier than he did... many of those same "Fed watchers" have wished that Greenspan was still at the helm of the Federal Reserve Board.

In hoping to stimulate the economy, Bernanke uttered words in the usual "Fed-speak" language that "additional 'policy easing' may well be necessary."  What a comedian this Bernanke guy is !

The Fed has it's own language.  Instead of using the nasty R word... recession... the Fed and many economists prefer to use their own term. They would rather say that the economy has been experiencing a period of "negative growth."  Negative Growth ?  Uh huh.  Yes, Ben.  Yes Mr Bernanke.

Several economists have been grousing recently that the Fed needs to be more Pro-Active than the reactive mode they have been in.  With the recent news of higher unemployment, the chances of a rate drop has increased marketly.  Whenever the jobless rate rises, inflation worries usually lessen.

Steps are being taken to turn the economy around.  If my memory serves me right, the Government currently in power during an election year really does not want a recession economy.  As Bill Clinton said in past elections... "It's The Economy, Stupid."

So... take heart everyone... there just may be some relief coming a bit sooner than many of us had previously thought !  And for us... the sooner it happens... the better.

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For a quick look at homes currently on the market, and news of many new home builder bargains... please visit Karen Anne Stone's website at www.NewHomeHuntersOfTarrantCounty.com .  Karen Anne may also be reached at (817) 929-3400.

Comment balloon 12 commentsKaren Anne Stone • January 11 2008 02:34AM

Comments

Karen,

Great post.  I don't see the Federal Reserve in an election year not continuing to drop rates in a country  headed towards recession. 

Posted by Julie Chapman, New Homes Sales Lakeland Florida (DR Horton ) almost 11 years ago
Karen Anne, I saw this news in the WSJ this morning.  I'm up in NYC at the Inman Real Estate Connect conference.  The buzz here is that we're heading into a serious recession.  Brad Inman says we're halfway through a 5 year housing slump.  2008- challenging; 2009 -- flat at best; 2010 recovery will begin.
Posted by Brian Block, Northern Virginia & D.C. Real Estate (RE/MAX Allegiance, Managing Broker/Branch Vice President) almost 11 years ago
Hi, Karen Anne
Great post.  Brenake and the BoG can not stave off the inevitable with additional rate cut.  It's a bandaid approach at best, and honestly it's one that's not working.  How low do rates have to be before they see free money isn't the answer?  That we are spiraling into a recession is a fact that a great many economists will agree on.  The powers that be might not want a recession in an election yet, but that's exactly what they've got.
Posted by Jesse & Kathy Clifton, Retired (Jesse Clifton & Associates, REALTORS®) almost 11 years ago
Hi Julie:  I think we see evidence of this type of reaction every four years.  But in this case, I do think that the economy needs to be stimulated.  Housing is in a slump, and housing is a major driver of the economy... so dropping rates until they get to the point that housing recovers is a great idea, and it does not add to the deficit like an economic stimulus package would.  Thanks for commenting.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago

Hi Brian:  Hopefully that recession will not be as far reaching as Brad Inman suggests.  I think that dropping rates will provide some stimulus to the housing market.  How much remains to be seen.  I think that will help consumer confidence, too.  But also, real estate really is local, and I think some areas will recover more easily than others.

By the way, glad you enjoyed the bus ride.  Sounds like a great way to get between NYC and DC. 

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago
Hi Kathy:  It's not working because they have not done anything yet.  Give it time.  Remember, real estate is local.  Some markets will be stimulated by additional rate cuts.  Some that are way over-priced because of 20% and more price increases per year will need a much longer time to "adjust."  So, I think lowering the rates will stimulate markets like Fort Worth more than they will markets like Phoenix, parts of Florida, Las Vegas, parts of California, and other areas that got way, way "overheated" over the last three, four or five years.  And, I believe that stimulating the economy by cutting rates is much better than a so-called economic stimulus package... because that adds to the deficit.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago
Karen Anne, It will be very interesting to see if they make the rate cuts or take the decisive actions that they promised that they led the market to believe that they might, because if they don't the market has already pre-corrected for the potential of a substantial cut.  If we do not get a huge rate cut the markets pre-anticipation uptick will be removed and if they do cut rates substantially or make other arrangements, then this actually might be a very good thing.
Posted by Lance Winslow (The Car Wash Guy) almost 11 years ago
Hi Lance:  Yes, when the markets get hints of anticipated rate cuts, they usually adjust to those cuts in anticipation of them happening.  So if dear Mr Bernanke does not come through with the cuts he alluded to, first, the market will bump back up, and second, he will lose credibility.  Not a good thing.  Thanks for commenting.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago
Karen thanks for the update. I am waiting in the wings hoping for any relief to the tragic state of our economy.
Posted by Dionne Morgan, Broker REALTOR ,GRI, e-PRO (Realty World Solano Realty) almost 11 years ago
Karen you look so familiar to me, were you at a TAMPA Main Event? or perhaps a Strategic Forum?
Posted by Katrina Madewell, Tampa FL Homes for sale | Tampa Bay - (813) 777-1196 (Charles Rutenberg Rlty- More than 5,000 agents(813) 777-1196) almost 11 years ago
Hi Dionne:  Yes, I am waiting too, along with thousands of other Realtors, lenders and buyers.  The economy is an issue at the top of many people's list of priorities, and the Bush administration just continues it's buffoonery... as consumer confidence gets lower and lower.
Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago

Hi Katrina:  I was not at the Tampa Main Event.  I had registered, and even booked my room, but came down with bronchitis that went into viral pneumonia, so I had to cancel.  I did attend the Main Event in Reston, Virginia, which is where I met Susie Roscoe and Adele Irving... two really great women.  The last "event" before that was the Brian Buffini RE/MAX Broker/Mentor training class in Houston in February of 2007... where I became a Buffini Certified Mentor.  I have never been to a Stragic Forum.  Are they worthwhile ?  Other than that, maybe we met in a previous life ?  Take care...

By the way, were you aware that there is a Main Event scheduled for Dallas on April 7-9 ?  I will be attending that, and will be staying at the hotel... the Hyatt Regency Reunion... which is where the Main Event will be. 

Posted by Karen Anne Stone, Fort Worth Real Estate (New Home Hunters of Fort Worth and Tarrant County) almost 11 years ago

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