Fed Says It Underestimated Housing Recession
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
Federal Reserve officials acknowledged they underestimated the American housing recession, while continuing to view inflation as the biggest risk to the economy.
“The correction of the housing sector was likely to continue to weigh heavily on economic activity through most of this year — somewhat longer than previously expected,” the central bank said in minutes of the May 9 Federal Open Market Committee meeting released yesterday in Washington.
Policy makers kept their prediction of a pick-up in economic growth and said “downside risks” to the expansion have “diminished slightly.” Inflation that’s too high for officials’s comfort, combined with the housing slump, suggests the Fed may not adjust interest rates in coming months.
The committee foreshadowed that the economy will expand a “little below” the “trend rate of growth through the remainder of this year and then pick up to a rate broadly in line with the economy’s trend rate in 2008.” Fed officials estimate the trend rate at about 3%.
