Fed Chair: Home Slump Lasting Longer than Expected
Federal Reserve Chairman Ben Bernanke told a bankers’ conference in South Africa Tuesday that the U.S. housing slump will last longer than he had previously expected, but it hadn’t spilled over into other parts of the economy.
Speaking via satellite, he also expressed concern about rising inflation, but made it clear that it was unlikely that the Fed would raise interest rates any time soon.
The Fed meets next on June 27-28, and many economists predict policymakers again will hold a key interest rate steady at 5.25 percent, where it has been for a year.
Bernanke said that when home sales leveled off last year, it appeared that demand had stabilized, but sales have continued to decline further this year and tighter lending standards have further constrained demand. Lessened demand makes it harder to sell off the still-large supply of unsold homes, he said, and as a result, construction “will likely remain subdued for a time.”
Source: The Wall Street Journal, Greg Ip (06/06/2007)
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