Will the Fed be inclined to support their pattern of stimulus?
*Financial Times, by Robin Harding, May 7, 2014
”The US housing market slowdown poses a fresh risk to growth in the world’s largest economy, Federal Reserve chairwoman Janet Yellen has warned in testimony to Congress.
Ms Yellen said the Fed’s otherwise optimistic outlook could be undermined if disappointing housing activity continued for the rest of the year.
Her remarks suggest the Fed still sees significant economic threats, despite encouraging data such as April’s jobs growth of 288,000, and will keep slowing its asset purchases at the modest pace of $10bn per meeting.
‘Readings on housing activity — a sector that has been recovering since 2011 — have remained disappointing so far this year and will bear watching,’ said Ms Yellen. ‘The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.’
New housing starts and existing home sales are both down on a year ago as higher interest rates, tight mortgage availability and slow income growth damp activity in a sector crucial to the broader recovery.”
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