Citing a rebound in economic activity while noting the housing sector remains slow (despite historically low interest rates and rising inventories), the Fed has announced another cut to its bond purchase program which was designed to keep longer-term interest rates low.  With the cut, the Fed is on track to end the stimulus program by the end of the year.

In order “to support continued progress toward maximum employment and price stability,” however, the Fed does plans to keep the short-term federal funds rate near zero “for a considerable time after the asset purchase program ends.”  At the same time, the Fed raised its target federal funds rate to a little over 1 percent by the end of 2015 and 2.5 percent by the end of 2016.

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Comments from “Plugged-In” Readers

  1. Posted by The Milkshake of Despair

    Could it be that “…the housing sector remains slow despite historically low interest rates and rising inventories…” is caused by asking prices being too high due to nearly a decade of cheap loans?

  2. Posted by anon2

    Exactly.

    And as I’ve posted before, it seems likely that home builders will respond by trying to target a lower price point for new construction in order to drive volume back up.

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