They also thought about raising 1/2 point, not just 1/4... I think it's housing that kept them from doing the right thing... as seen here in the UK, there's tremendous pressure on the central bank to keep rates low to keep housing prices high. That's sick and wrong, and they know it.
Although the Committee discussed policy approaches ranging from leaving the stance of policy unchanged at this meeting to increasing the federal funds rate 50 basis points, all members believed that an additional 25 basis point firming of policy was appropriate today to keep inflation from rising and promote sustainable economic expansion
The underlying pace of residential activity seemed to moderate in the first quarter. After unseasonably warm weather allowed a high level of single-family housing starts in January and February, starts fell in March to their lowest level in a year.
Sales of new homes also moved up in March, but their average in the first quarter was down substantially from the peak in the third quarter of last year.
House price appreciation appeared to have slowed from the elevated rates seen over the past summer. Growth in the average sales price of existing homes in March, versus a year earlier, decelerated sharply, and the average price for new homes in March fell compared to a year earlier. In addition, other indicators, such as months' supply of both new and existing homes for sale and the index of pending home sales, supported the view that housing markets had cooled
May 31, 2006
Fed minutes on housing bubble and 1/2 point rise idea released
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These guys are clueless. This has bee the problem with this whole cycle. No one wants to do the right thing. Everyone just wants to keep kicking the ball down the road.
Let's face it, nothing will be done until after the fall elections have passed.
"Consumer spending posted a sizable increase, driven by January's bounceback in motor vehicle purchases and an acceleration in spending on other goods at the turn of the year."
Was that the zero interest loans, and the last gasp of housing ATM spending? Watch to see if they sing that song much longer. On the street average Joe is cutting back on extras to pay for the things the Fed doesn't like to include in the CPI.
It has already shown it's face:
"Nonfarm payrolls increased by 138,000 jobs in April following robust growth in March...and a range of services-producing industries strengthened, with the important exception of retail trade, which more than reversed its March gains."
Average Joe is feeling the pinch. When his adjustable mtg keeps going up this will be even more pronounced. When the RE decline hits really hard it will be multiplied.
How are they going to "fix" this?
That whole consumer spending binge in January was when all those dumbass consumers still thought the price of their homes were going up 20% per year. You know, let's take out a 30-year loan on a Lexus and see how smart that looks.
These guys don't want to do a 1/2% increase because they think it's going to freak out the market, which it will. The Fed minutes also smoothly skipped over the part where the median sale price of houses have declined over the past couple months, instead focusing on brisk sales. Yeah, if I was selling crack for $1 per rock, I would have brisk sales too.
The economy crested in January, much like it did during the 1st half of 2000.
Now clear signs of labor weakness and downturn in Q2 2006, it smells really really bad.
There are two businesses at fault for this whole mess. That of the REALTOR ® and POLITICIAN ®.
Really amazing! Useful information. All the best.
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